Firms warned about the cost of being nice this Christmas

BOSSES are being warned not to forget the tax implications of providing parties and giving gifts this Christmas and New Year.

According to Katherine Bullock, tax partner at PricewaterhouseCoopers (PWC) in Leeds, although employee entertaining costing up to £150 per head is exempt from tax, HM Revenue & Customs (HMRC) generally view gifts to staff as a taxable benefit.

Ms Bullock also warned that many owner/managers might not realise that changes to the rules surrounding taxis also means that treating staff to a ride home after a Christmas party may land companies with an extra tax bill.

“Taxi journeys from work to home are deemed as a benefit to the employee because the journeys are seen as private,” she said.

Meanwhile, businesses also need to be careful with their gifts.

“While HMRC accepts that trivial gifts are not taxable if the gift is regarded as a reward for services, or it’s a gift of money or a voucher, then it will be,” Ms Bullock said.

“There is however an exception for what are deemed as ‘trivial’ gifts so it is worth having the guidelines for what a trivial gift is well wrapped up to ensure goodwill doesn’t cost more than intended.”

She continued: “And a trivial gift can be more than you think – it includes items such as a turkey, a bottle or two of ordinary wine or a box of chocolates. But a case of wine or a hamper is not trivial and would be a taxable benefit.”

Certain gifts to customers are tax deductible for the business if they don’t exceed £50 but this doesn’t include gifts of food, drink or vouchers exchangeable for goods.

As a guideline mince pies and sherry for staff worth up to £5 is classed as trivial and a Christmas turkey worth £20 also meets the criteria.However, six bottles of bubbly for an employee isn’t.

“If you’re unsure don’t spoil the festive season by landing an unexpected tax bill, check with HMRC,” said Ms Bullock.