Christmas is coming and if you are planning to give your employees some Christmas cheer there are a few things to remember to ensure they do not incur additional tax or National Insurance deductions.
Staff parties - not necessarily at Christmas time - must cost less than £150 per head and be open to all staff members. This amount includes any VAT chargeable, transport and accommodation costs. The parties may be held at multiple locations if required but all employees must be able to attend one of them. HMRC consider the £150 to be an exempt expense so will not be considered a taxable benefit for those attending. To calculate the cost per head, the total cost of the function should be divided by the number of attendees which can include partner and spouses if so desired. If the total cost per person does exceed £150 then be aware that the entire cost will be taxable not just the amount over the limit.
Employers may also choose to give staff a Christmas bonus or gift in addition to, or as an alternative to a party. Christmas bonuses are not exempt from taxation and must be treated as normal income subject to the usual tax and National Insurance rules. The taxation on gifts is dependant on the value. If less than £50 in value and not given in cash or cash vouchers then HMRC usually consider them to be exempt, unless they have been given as a reward for good work or performance or is contractual, in which case they will need to be declared.
More information regarding expenses and benefits can be found at: Gov.UK