The cost of an annual function e.g. a Christmas party is an allowable expense for businesses as long as:
- The party is open to all employees
- The cost per head does not exceed £150 throughout the year. If this limit is exceeded, it will then be a benefit in kind and income tax and class 1A national insurance will be due on the entire cost of the party.
This is not an allowable business expense, even if the event comprises both clients and staff.
Gifts to Staff
Employers can now treat their employees to a tax-free gift, for example, at Christmas under the trivial benefit rules. The following conditions must be met:
- The gift must cost £50 or less. If the gift costs more than £50 the entire cost of the gift will be taxable.
- The gift cannot be cash or cash vouchers (gift vouchers are allowed, provided they cannot be exchanged for cash.)
- The gift cannot be a reward for their work or performance
There is no financial limit on the amount of trivial benefits an employee can receive, except for directors of close companies, who cannot receive trivial benefits worth more than £300 in a tax year.
Examples of trivial benefits are a bottle of wine, box of chocolates, flowers etc.
Gifts to Clients
Gifts to clients will only be allowable if the following conditions are met:
- The cost of the gift per individual is less than £50.
- The gift bears an advertisement for the business
- The gift is not food, drink, tobacco or exchangeable vouchers.
Vouchers: Cash vouchers will be subject to Tax and National Insurance.
Bonuses: This will be treated as additional Salary and will be subject to PAYE and NI by both the employee and employer.