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Financial side of the Festive Season

  • 15th November 2023

My favourite time of year is upon us again. What other time of year can you eat as much as you like, have enough social events that you can go out and drink whenever you want, and to top it all off you get gifts!

I’ve therefore put together this blog to summarise all the things I like around the festive period, whilst also keeping you on the right side of HMRC’s Grinch-like view of Christmas.

I’m lucky enough to have two young little boys, and seeing their faces and their delight at all things Christmas makes it truly magical. The thing they love the most is gifts, so let’s start with that one!

Gifts to staff

Under £50 – you can give gifts to your staff to the value of £50 (including VAT) which counts as a ‘trivial benefit’ exemption so no Tax or NI payable. This does not apply to cash however. Unfortunately, gifts to staff are not a tax-deductible expense. Trivial benefits for directors, office holders and their families are capped at a total of £300 per tax year.

Over £50 – any gift over the value of £50 (including delivery) will count as a taxable benefit. They will have to pay tax and you will have to pay NI. This would also be classed as entertaining and not tax-deductible as an expense.

Cash gifts – if you do give a cash bonus to staff, this will count as earning so will need to be added to an employee’s other earnings with deductions taken through normal payroll.

Time off gifts – if you want to do something that costs nothing and attracts no tax, you could allow half a day’s holiday to staff for Christmas shopping or to watch the children’s Christmas nativity.

If you wanted to improve your CSR and staff morale you could even consider a team-building day to support a local charity at Christmas time.

Gifts to clients

Business gifts are not normally allowed as a deduction against profits but there are a few exceptions:

Gifts of free samples of products you sell are 100% deductible

Gifts carrying your firm's branding are tax deductible but only up to £50 per person. (Not food, drink, tobacco or vouchers).

These must carry a clear advertisement for the business (branding or logo) which must be on the gift itself, not just the packaging.

One less for the kids and more for the parents is the Christmas Party. It's the perfect way to sign off for Christmas and spend the entire festive break worrying about what the hell you did and what you said to the boss!

Christmas Parties

Provided your Christmas party meets certain rules, it can be tax and NI free.

Whether virtual or physical you have an allowance of £150 per employee. This is the cost to the employer and includes VAT, transport and overnight accommodation. The party must be open to ALL employees. VAT is reclaimable on these expenses but only for staff, not their partners. If your party plans to extend beyond the £150 per employee, you could ask staff to pay a minimal contribution (the excess over £150) to avoid NI and Tax implications.

As noted, I love the social events that go on in the run-up to Xmas, but how do HMRC view these corporate events?

Client Entertaining

This is an easy one, and typifies HMRC:

You cannot claim a tax deduction for client entertaining.

Hopefully, you can eat, drink, be merry, and avoid the Grinch’s traps!

We have created a handy FAQ including all you need to know. You can download this here.

Read more on: Tax advice

Written by: Matthew Priest

All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.