As the festive season approaches, BLM Group’s Editorial Director Steve Fisher looks at the ins and outs on what tax can be claimed at Christmas and how to stay on the right side of HMRC.
That fuzzy feeling of seasonal spirit is all around us. The media is alive with announcements that the Waitrose ad is on TV and no doubt the coca cola Christmas wagon will soon be visiting a town or city near you.
That’s right, Christmas is only a few weeks away, and with it the chance to treat your favourite clients and provide your staff to their long awaited party – but how up to date are you on the tax rules over these items?
In general, HMRC advises that businesses treat gifts in the same way that they treat entertainment. This means that, with a few key exceptions, gifts are not tax deductible. But what are those exceptions and how can you make the most of them?
The office Christmas party is of course a tradition, but did you know it is also tax deductible? Staff annual functions can be tax-free where the total cost per person attending is not more than £150 per year (including VAT).
A big caveat is that if you overspend the amount per head then the whole cost of the party is subject to tax, not just the amount that exceeds the limit. The £150 total isn’t just for Christmas either, its an annual limit. So, if you put on both a summer party and Christmas party, that £150 per person has to spread across both events. For example, if you spent £80 per person on an annual party back in July, you’ll only have £70 per person in December.
You also need to be careful with going over that £150, as it’s an exemption and not an expense claim. That is your entire limit, go over by even 10p per person and you can’t claim for any of it. It has to be spot on or below, otherwise you get nothing.
Seasonal treats for clients and staff may also be deductible, but in order to qualify they must be seen as promotional gifts. This means displaying a ‘conspicuous advertisement’ in the form of your company logo. But with many options available for personalisation, it’s incredibly easy to give meaningful gifts while staying tax free.
Promotional gifts can be given to staff tax-free providing the overall cost does not exceed £50 per person per year. It’s important to note that gifts of food, drink, tobacco and vouchers are specifically excluded from this scheme.
Tax efficient charitable donations can be made through Gift Aid of course, or in cash, stock or investments. There are various tax efficient schemes and incentives for individuals, sole traders and companies so it pays to make sure that your gifts are deductible depending on your business size and your accountants are probably the best people to advise on this.
Third party gifts, which employers may receive from third parties such as business associates or clients, are exempt from tax providing their total value is less than £250. It is very important to be aware of anti-bribery rules when dealing with such gifts. In many cases simple ‘common sense’ can be applied to tell when a gift should be accepted. Anti-bribery rules now mean that even those aware but not directly involved may be found culpable should such an illegal transaction take place.
Please Note: This article does not constitute specific financial/legal/tax advice for your situation and readers are urged to seek professional advice before making any decision.