The 12 Tips of Christmas Tuesday 10th December 2013

Presentation byRupinder Howard

What are the tax implications of a staff Christmas party?

HMRC allow employers to spend anything up to £150 per employee on annual staff events free of any tax consequences. It is important to remember that if you hold more than one event in a year, for example a summer BBQ as well, the £150 must cover both events. All employees must be allowed to attend, and the £150 can be spent however you like but beware, if you spend as little as £1 more, the entire amount becomes taxable on the employee.

2. Can I invite anyone else to the party?

In short, yes, so long as it is predominantly a staff party, and everyone gets a £150 allowance. This includes spouses and partners, and even customers. Unfortunately, however, you will only be able to claim VAT on the portion of the cost that relates to staff.

3. I want to give my staff a bonus, is there a tax efficient way to do this?

Unfortunately any cash bonus will need to be taxed at source just like normal salary. You could, however, consider giving your employee(s) the ‘gift’ of a company mobile phone. As long as the contract is in the name of the employer there is no taxable benefit on the cost of providing an employee with a mobile phone, and you’ll know you can always get hold of them!

4. What about a Christmas gift, can I give my staff a small present?

HMRC provide the following concession; “an employer may provide employees with a seasonal gift, such as a turkey, ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts are considered to be trivial and as such are not taxable”.

5. Does this apply to customers, too?

Gifts to customers are treated differently, but there are tax free gifts available for them too. The total cost of gifts to any individual customer must not exceed £50 per annum, and the gift must contain a ‘conspicuous advert’ for the business. Food, drink and tobacco are not allowable, however if your business trades in such items you can provide samples. Exchangeable vouchers are also not allowed.

Common items include diaries, pens or mouse mats containing your company logo.

6. Do I need to do anything different to pay my staff early before

Christmas?

Under new ‘Real Time Information’ rules, details of your payroll must be submitted to HMRC before payment is made to your staff. To ensure your records are accurate, check your payroll software is updated before Christmas or advise your payroll administrator.

Also make sure your staff are aware that the early pay day will have to see them through until the end of January!

7. What about staff holidays, how do I ensure they have enough left for

Christmas?

Keep a record of staff holidays throughout the year, and if staff have to use their annual leave to cover the Christmas period, ensure they are aware of this and that they keep sufficient days aside. You can also allow employees to take unpaid holidays.

8. What about private gifts, is there any implications to a gift of cash?

Inheritance Tax needs to be considered here, and there are a number of exempt gifts:

- small gifts (less than £250 per person per annum)- gifts within the standard annual exemption (£3,000 per annum)- gifts made in consideration of marriage (£5,000 per child or £2,500 per grandchild) - ‘normal gifts out of income’

It is important to keep records of gifts made for Inheritance Tax purposes, and we would recommend discussing any gift with us before making it.

9. Should I be thinking about a Trust?

Discretionary Trusts can be set up for about £500 and enable you to transfer assets up to your available nil rate band into Trust free of IHT, so long as the donor survives seven years after the gift. Unlike a gift to an individual, a Discretionary Trust allows you to maintain control over the assets.

10. Talking about Inheritance Tax; what else should I be doing?

The first step towards managing IHT is to make a will. If you die intestate you will have no control over how your assets are distributed, and may end up paying unnecessary tax. This is also a great opportunity to review your estate and take action to mitigate the tax suffered, protecting your assets for future generations. Contact us to discuss estate planning in more detail.

11. New Year – same headaches?

Have you left your Tax Return until January again? If you have any unexpected tax liabilities you’re not giving yourself much time to plan for the expense, especially after such an expensive time of year in Christmas! Get your Tax Return and accounts together as early as possible next year, and give yourself the maximum amount of time to plan for that nasty payment deadline!

12. Christmas Office Closure – are you prepared?

If your company has an accounting year end of 30 April 2013 then your accounts must be filed with Companies House by 31 December 2013, but our office closes for Christmas on 24 December – so make sure you have everything signed and returned to us before Christmas Eve!