Gifting employees: Benefit your staff, not the taxman

Large or small business, all employees deserve a thank you for their hard work at Christmas or  any other time of the year. Showing your appreciation of your staff’s efforts by means of gifts and benefits is good for morale, but you need to take care to do this in the most tax efficient way.If you go about it in the right way, you can give tax free benefits to your staff whilst also obtaining tax relief for yourself.

Throwing a party?

You can spend up to £150 per year per head without any tax implications.   Anything above and the whole amount becomes taxable, not just amounts over £150.  An added bonus is that the £150 limit is also applied to guests attending, which makes the limit £300 if a member of staff brings a partner or friend.The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend.

Gifts?

Small gifts, such as chocolates, flowers or a bottle of wine are considered to be ‘trivial’ by the taxman, and therefore have no tax implications.  The following conditions for the trivial benefit exemption are listed below:

• Gifting up to the value of £50
• The gift is not cash – see below guidelines
• The gift does not form part of an employee’s benefit entitlement, including under salary sacrifice
• And lastly, the gift is not provided in recognition of particular services performed by the employee as part of their duties

Cash bonus?

Cash bonuses are usually paid through payroll, and the usual tax and national insurance is deducted.  Unfortunately, gift vouchers are also subject to the same charges, which can paid by the employer by setting up a ‘PAYE Settlement Agreement’ with HMRC, or declaring on an employees’ P11D for the employee to bear the cost.Mirandus Accountants supporting local businesses in the City of London and Greater London area, providing accounting and tax services to SMEs and OMB clients and access and training on QuickBooks.Why not give us a call to see if we can help you complete your SA this year and help you be tax efficient.