Yes, that’s right, somehow it is already that time of the year again. The time for boosting the team morale by unwinding, having a good party and maybe the odd gift or bonus to go around too (we can all hope).

The only thing worse than that sinking regret of not knowing if you made a fool of yourself or not at the Christmas party would be to wake up to an unwanted tax bill due to your boss being too generous.

As much as I don’t like to be that boring accountant who takes away the fun of a party, the following information could save you and your employees from making any contributions to the HMRC party.

The Christmas Party

Despite their reputation, HMRC isn’t all that bad, they do allow you to have a party and deduct it from your company’s tax bill. However, as expected there are plenty of rules and restrictions to this:

• It must be open to all staff (they don’t all have to attend)
• It must cost less than £150 per head (including every element – food, drink, taxis etc)
• The above allowance is an annual allowance too, so if you had a summer party this will reduce how much is left to spend (if the summer party was £50 per head then only £100 per head can be spent on the Christmas party)

Unfortunately, even if you only got over the £150 by £1 the whole amount becomes taxable on the employee (so make those gin and tonics a single).

Staff Christmas Bonus

Unfortunately, whether it is cash or not, any bonus is deemed as income and MUST be reported in the usual ways through the company payroll. Bear in mind the difference between net bonuses and gross bonuses as one costs you a lot more than the other. More information on this can be found here.

Christmas Gifts

Employees – Christmas gifts to employees can indeed be tax deductible with no implications on the employee as long as they meet the trivial benefits rules as explained by my colleague here, so why not treat them to a nice bottle of wine?

Clients – For a gift to either current or potential clients to be allowable for tax it must be both less than £50 and prominently feature promotional logos or adverts for your business, as this makes it advertising.

Consequence

If you have already or do accidentally spend too much on an employee gift or party then you must let your payroll manager know as they will either need to add this to the payroll run or do an annual P11D to recoup the tax and NIC that should have been paid on this benefit.

If you would like further information or you would like to discuss how we could help you, please get in touch.