The 12 tips of Christmas
1) I want to give my staff a cash bonus at Christmas. How I can I do this tax efficiently?
Santa says: Unfortunately a cash bonus needs to be taxed at source under PAYE.
2) What is the tax position on hosting a Christmas party for my staff?
Santa says: The basic position is that employers can spend up to £150 per head on annual staff events without it being treated as a taxable perk. The event must be open to all of your employees. You can spend your £150 per head however you like: on food, drink, entertainment, accommodation or travel. But spend £151 and the whole amount becomes a taxable benefit for the employee.
3) Can I invite customers to the staff Christmas party?
Santa says: The good news is that everyone who attends gets a £150 allowance, including guests; this covers spouses and partners, and even customers if they are invited to what is predominantly a staff event.
4) Can I claim the VAT back on the staff Christmas party?
Santa says: Only VAT on the cost which relates to your employees is recoverable. The proportion of VAT relating to the spouses and customers at a Christmas party is not recoverable. Also, do note that the £150 exemption limit includes VAT, even if you reclaim it.
5) What can I give to staff for Christmas with no tax implications?
Santa says: You may find the following Revenue concession useful – “An employer may provide employees with a seasonal gift, such as a turkey, an 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.”
6) What can I give to customers as Christmas presents that is tax allowable?
Santa says: Gifts to customers are only allowable as a tax deduction if:
- The total cost of gifts to any one individual per annum does not exceed £50
- The gift bears a conspicuous advert for the business
- The gift is not food, drink, tobacco or exchangeable vouchers.
As with Christmas parties you need to be careful, as if the gift costs more than £50 (including gift wrap) the whole amount will be disallowed.
Common examples of allowable gifts are diaries, pens and mouse mats. The advertisement should be on the gift itself, and not just on the wrapping.
7) Are there any tax implications in giving a gift of cash?
Santa says: These are the type of exempt gifts/lifetime transfers:
- Small gifts (<£250 per annum – each)
- Gifts falling within your annual exemption (£3,000 per annum – each).
- Gifts made in consideration of marriage (per child £5,000 – each)
- Gifts made in consideration of marriage (per grandchild £2,500 – each)
- Normal gifts out of income
(Gifts made during lifetime providing you survive for a minimum of seven years after the gift)
It is important to keep a note of any cash gifts made for Inheritance Tax Purposes.
8) New Year = New resolutions
Santa says – Make a Will
This is the first step towards avoiding Inheritance Tax. “If you die intestate you will have no control over how your assets are distributed and you may end up paying IHT unnecessarily.”
This is also a great opportunity for you to review your tax planning, ensuring you protect your estate for future generations.
9) Should we talk about Trust while eating Christmas Turkey?
Santa says – Keep it in the family
Discretionary trusts can be set up for about £500 and enable assets up to the nil rate band of IHT of £325,000 per person or £650,000 for a married couple or civil partnership, so long as the donor survives seven years. Unlike outright gifts, these trusts let donors retain control of the assets
10) Key Dates
Santa says – Remember!
If your company has a business year end of 31 March 2012 you must pay your corporation tax on or before 1 January 2013.
If you are Pay As You Earn and you have a tax liability of £3,000 or less, and if we can do your Tax return before 30 December 2012 your underpayment could be coded out through your PAYE coding- helping with cash flow!
If your company has a business year end of 30 April 2012, your company accounts need to be filed at companies house on or before 31 December 2012.
YOUR TAX RETURN must be filed on or before 31 January 2013
11) What do I need to do to allow staff to be paid before Christmas?
Santa says: Update your payroll software or advise your Payroll Administrator to bring forward the pay date and make sure all employees aware.
12) How do I ensure all staff have sufficient holiday entitlement to allow the business to close during the Christmas period?
Santa says – Keep a record
Make employees aware that they need to save holidays for when the office is closed for the Christmas period and keep a record throughout the year of when holiday entitlement is used. You can also allow employees to take unpaid holidays.