In the current economic climate, it's useful to know how you can benefit and incentivise staff in a tax-free way. If you employ staff and want to thank them this Christmas by either inviting them to a staff party or giving them a festive gift, the following HMRC pointers should help ensure that the decision you make benefits everyone.
• You can provide an annual Christmas function for employees and their partners with no charge to tax, as long as the cost per head does not exceed £150. The cost of the function includes VAT and the cost of transport and/or overnight accommodation, if these are provided in order to enable employees to attend.
• You can also give all employees a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates. These gifts are considered to be trivial and as such are not taxable. For an employer with a large number of employees, the total cost of providing a gift to each employee may be considerable, but even in this situation; there will be no charge to tax as long as the gift is deemed to be trivial.
In other words, you can benefit your staff without them paying tax and the cost is treated as a tax-deductible expense! If these conditions are not met the benefits need to be reported by the employer and tax paid by the employee, so make sure that you stick to the rules.
Whatever you decide to do remember not to take any action until you have sought professional advice from your accountant.
