Employers should note that certain gifts to staff at Christmas are tax free if structured correctly. Employers are allowed to provide their directors and employees with certain “trivial” benefits in kind tax free. This exemption applies to small gifts to staff at Christmas where the cost to the employer is no more than £50, this is in addition to gifts on their birthday, or other occasions and includes gifts of food, wine, or store vouchers.
CHRISTMAS PARTY TIME!
There continues to be no taxable benefit for employees provided that all staff are invited, and the cost to the employer does not exceed £150 a head, inclusive of VAT.
If you have already had an summer event, provided the combined cost of the two events is no more than £150 a head, there would be no taxable benefit in kind. If, however, the summer event cost £80 a head and the Christmas party £100 a head, only one event would qualify for the exemption and the employees would be taxed on the £80 benefit. Alternatively, the employer could deal with the tax and NIC on behalf of the employees by entering into a PAYE settlement agreement (PSA) with HMRC.
The conditions for benefits to be included in a PSA are that they must be:
(a) minor, as regards the amount of the sums paid or the type of benefit provided or made available;
(b) irregular, as regards the frequency in which, or the times at which, the sums are paid or the benefit is provided or made available;
(c) paid in circumstances where deduction of tax by reference to the tax tables is impracticable; or
(d) in the case of a benefit provided or made available, shared between employees so that apportionment of the benefit between the employees is impracticable.