Ding dong happily on the high tax benefits, we “bring” gifts
After a quiet ‘Christmas Covid’ last year, businesses in Northern Ireland are now gearing up for their long-awaited Christmas party.
To sprinkle in some more festive cheer, Lisburn-based digital accounting specialist Exchange Accountants came up with a few ‘cracker’ ideas to help make this year’s staff party a little more cheerful for local businesses.
âSometimes the ‘taxman’ may seem like an actual version of the infamous Ebenezer Scrooge skinflint, but Christmas can be a season of goodwill if businesses take advantage of some of the seasonal perks offered by HMRC,â said Gary Laverty, director at Exchange Accountants . .
âChristmas can be an expensive time of year for businesses, as many organize parties for their staff and buy gifts for important clients. However, there are a number of tax benefits, specific to this time of year, that many businesses are unaware of, but which will help lower the overall cost of Christmas for their business. “
With that in mind, Exchange Accountants have put together five practical tax relief tips to help businesses make Christmas as tax efficient as possible:
The staff Christmas party
Christmas wouldn’t be the same without the annual staff party, but did you know employers can spend up to Â£ 150 per capita tax free on annual social events to entertain staff. This amount should cover food, drinks and, where applicable, transportation, room rental and accommodation – and also applies to guests such as the employee’s partner / family. To qualify for the exemption, the event simply needs to be something the company intends to host each year, rather than a âone-timeâ event. VAT can also be reclaimed on costs provided that valid VAT receipts and invoices are kept.
Plus, for Covid-conscious businesses that don’t feel quite ready to party in person, this perk also goes for virtual Christmas parties that take place online – with costs attracting the same level of tax relief only for a physical event. For example, if, as part of the virtual party, you provide your employees with baskets containing food and beverages to be enjoyed during the virtual party, the cost of providing them would also be eligible under the exemption from Â£ 150.
Be careful though. Whether physical or virtual, businesses should ensure that the cost does not exceed Â£ 150 per capita as the FULL amount would then be taxable and not just the difference.
Tax-deductible Christmas gifts for customers and clients
Gifts for clients and customers are tax deductible as long as the cost per year is less than Â£ 50 per person and your gift contains significant promotion for your business. Unfortunately, gifts of food and drink do not qualify for this particular benefit. VAT can be reclaimed as long as the cost of the gift does not exceed the limit of Â£ 50.
Christmas gifts for staff
Gifts for employees are tax deductible if they cost less than Â£ 50 and are considered an ‘insignificant benefit’ – in other words, they are not a performance-related reward or part of their contract. . Again, this is an ‘all or nothing’ exemption – so if the cost of a gift exceeds Â£ 50, the full value will be taxable to the employee under the usual ‘benefits in kind’ rules.
Unlike gifts to customers, gifts to your employees that contain food or alcohol (for example, a basket or a bottle of wine) are tax relief. VAT can also be fully reclaimed from the cost of gifts to employees.
While cash gifts will attract tax relief for your business, they are NOT tax exempt for employees and should be taxed along with the employee’s other income through payroll. Likewise, vouchers are tax deductible for your business, but NOT tax exempt for the employee and subject to PAYE and National Insurance – although a gift card for a specific retail store. is acceptable.
End-of-year employee award
If you’ve had a successful year and want to reward particular staff members for their contribution during the year, there are a few non-taxable cash rewards you can give to staff. ‘Incentive prizes’ of up to Â£ 25 may be awarded to employees in recognition of extra special effort or good suggestions for the company. At a higher level, ‘Financial Benefits’ rewards of up to Â£ 5,000 (subject to certain limits) may be awarded to staff who have played an important role or made a suggestion that has saved your business or to earn a lot of money.
These staff suggestion programs should be open to all employees and financial rewards should only be given in the event that an employee goes beyond the normal call of duty or makes a business improvement suggestion that does not. not part of their daily work (eg attending a ânew ideasâ meeting).
Receiving clients and clients is generally not tax deductible, but there are exceptions to the rule that may allow your business to deduct the cost from your tax bill. One of those exceptions is that if by removing a particular person they add value or provide a benefit to your business – possibly in the form of important advice or research that will help your business – without any reward for themselves. other than a free meal. , then this cost is tax deductible.
âThese are the most common exemptions available to NI businesses this Christmas,â added Gary Laverty. âBut there are many other ways that businesses can maximize tax efficiency this Christmas and throughout the year – both from a business and employee perspective.
âAs always, we advise companies to keep very accurate records of costs and event attendees (if any) to support their tax relief claims, in case the HMRC needs more information on the costs claimed. As long as the business can demonstrate that the event, gift or award meets the relevant criteria for tax relief, there are certainly savings to be made, âhe concluded.
For more information on any of the above tax efficiency tips and the digital accounting services provided by Exchange Accountants, call 028 9263 4135, visit www.exchangeaccountants.com, or email [emailÂ protected]
Established in 2011, Exchange Accountants provides top-notch accounting and tax advice to a wide variety of SMEs and local individuals. Over the past 10 years, the company has built its reputation in the digital accounting arena, becoming the first accounting firm in Northern Ireland to be recognized as a Xero Gold Partner and, more recently, achieving the status of Platinum partner with the market leader in cloud accounting. software provider.
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