With Christmas fast approaching, a reminder of the tax implications of Christmas parties and gifts provided to staff.
A Christmas party for your employees is considered entertaining, but there is a tax exemption for employee entertaining that applies to ‘annual parties’, which are open to all staff.
The tax-free limit for this is £150 (inclusive of VAT) per guest, which must include any related transport or accommodation costs. However, if the total exceeds £150 per head, the whole cost becomes taxable as a benefit in kind, not just the excess.
It is also important to remember that the £150 per head applies to both your employees, and their guests or partners.
With regards to Christmas gifts, any cash or vouchers paid to staff will be taxable, however HMRC won’t seek to tax ‘seasonal presents’, such as turkeys or chocolates, so long as the cost is reasonable.