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Tax Friendly Christmas Celebrations

After two winters under pandemic restrictions, it’s only natural that many will want to make this Christmas extra special. So, conscious of the cost-of-living pressures that are starting to bite we thought we would highlight how businesses can take advantage of certain tax breaks to make this time as festive as possible.

Party with extra Christmas cheer

We know many employers like to celebrate with staff at an end of year Christmas party. The good news is there is a ‘Christmas party’ tax exemption. To be absolutely accurate the exemption actually applies to ‘annual events’ ie. events that happen each year, so could equally be applied if you hold a summer barbeque every August.

There are a few points you need to be aware of to qualify. You must make sure that all employees are invited, or all employees based at one location, and the cost must not exceed £150 per person including VAT and other costs, such as transport and accommodation.  A bonus is the exemption also includes guests, meaning spouses or partners can come along too.  You won’t need to report anything to HMRC if the costs remain below the £150 per person figure. But be careful, as if you go over the £150 limit, you will be taxed on the whole event cost, not just the excess amount.

If you do hold more than one annual event in the same year, such as a Christmas party and a summer barbecue, the £150 per person allowance needs to cover both events.

Merry and bright gifts and cards

If you want to give employees a seasonal present, you can do so free of any tax or national insurance contributions (NICs). So, if you want to give a bottle of wine, a turkey, or a box of chocolates, providing cost of the gift is ‘trivial’ ie. less than £50, the gift will usually not be taxable. However, this £50 allowance does not apply to gifts of cash or a cash vouchers.

Gifts for clients can also be tax deductible.  However, these must carry a clear advertisement for your business, this could be branding or a logo, and must be on the gift itself not just the wrapping. The £50 limit again applies and the gift can’t be food, drink or vouchers.

If you send Christmas cards to clients these can also be considered as a tax-deductible expense. Alternatively those businesses that choose to donate to charity instead of sending cards could pay less Corporation Tax.

A December to remember

If your business needs to be mindful of finances this year and there is limited available cash to spend, you could consider an alternative staff benefit that attracts no tax.  Allowing a little extra time off to watch a school concert or nativity play or to do some Christmas shopping outside peak times could be really appreciated. Some gifts you can’t put a real cash value on, but they still show that you are a caring employer.

If you would like more guidance or advice on how best to manage your festive finances do get in touch. We’re here to help.

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