Ah yes. Tis the season. Tis the season of giving. Tis the season of receiving. Tis the season of taking your employees out for a big old party and them being very grateful for the boss paying for everything for one night only! It is also, very conveniently a form of tax exemption from HMRC!
Of course, here at Jupps we also have enjoyed our Christmas party already, and with aslightly sore head I write this and give some accounting advice for the rules around throwing the Christmas Bash.
1) It must be an annual function – If only it could be Christmas every day!
Unfortunately, it can only be once a year, so throwing a party every day of the year isn’t going to fly with HMRC!
2) £150 per head (including VAT!) – The amount that you can spend per person across the party. Seems very generous and it is. If you are going down the route of dinner then drinks however, this can rack up the bill quite a lot, so be conscious of how many Bailey’s that Steph from marketing has been necking! If the total cost per head goes even £1 over the £150, the full amount becomes taxable.
3) It must be open to all employees or staff at a specific branch – HMRC is all about inclusiveness and making sure no one is left out.
Christmas Gifts, Vouchers & Trivial Benefits
Feeling like running a Santa’s Grotto for your team? You can also give Christmas gifts. But before you start handing out envelopes and vouchers, HMRC has a few opinions (of course they do).
1) Cash and cash-like vouchers
If you’re thinking of slipping your employees cash or a voucher they can turn into cash, HMRC basically treats this as normal pay. That means it has to go through payroll and gets slapped with the usual PAYE and National Insurance. Not exactly the fun festive surprise anyone wants.
2) Non-cash gifts and vouchers
Vouchers that can only be spent on actual goods or services? These are normally
taxable too and would need to show up on the P11D. HMRC loves paperwork almost
as much as we love mince pies.
BUT they can escape tax under the “trivial benefits” rule, as long as you tick all the boxes:
1. £50 or under (VAT included!) – Once you go over £50, even by a cheeky pound,
the whole thing stops being “trivial” and becomes very much taxable.
2. No cash, no cash-convertible vouchers – HMRC draws the line at anything that
acts like money.
3. Not a reward for doing a great job – So no “Congrats on hitting target, here’s a £50
bottle of fizz.” That’s a big HMRC nope.
4. Just a genuine festive gesture – A little thank-you, not a performance bonus in
disguise.
If your gift fits all of the above, rejoice! No tax, no National Insurance, no HMRC forms, and
no accountant quietly weeping into their Advent calendar.