Ask the Accountant for Monday, November 17

ASK THE ACOUNTANT – a weekly guide to the world of business finance with Warings Accountants

Q. Does the Tax Man have a heart at Christmas?

A. The answer is “yes” – but possibly not much of one! However, in entering into the festive spirit, businesses can actually obtain some tax relief on certain expenditure.

On Christmas parties, for example, where an employer provides an annual party for employees, no charge to tax arises on the employees if the cost of the event per head does not exceed £150. This is provided it is available to all employees. In fact, no charge to tax arises if there is, in a year, more than one event as long as the aggregate cost of all events does not exceed £150 per employee.

Care should also be taken in regard to VAT. The employer can claim VAT back on the cost of such parties but does not extend to partners of employees. In such cases, an apportionment may be required by the company.

When it comes to Christmas gifts - although not big ones - 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 and all of these gifts can be treated as trivial benefits. Where there are a large number of employees, the cost to the employer might be significant but that situation doesn’t matter as long as the amount spent per employee remains within the trivial benefit provisions.

Guidance by HMRC to its inspectors advises them to exercise their judgement as to what might be considered trivial. So if, for example, you were to extend the bottle of wine to a case of wine per employee then you may need to be careful.

It is important to remember that gifts received by employees from third parties (for example, customers and suppliers with whom they may have dealt during the year) as a result of their employment may also be taxable. However, as long as the cost of the gift to the employee does not exceed £250 they won’t be taxable.

Finally, another benefit that is not taxable is if your employer pays for your seasonal flu jab! However, all other medical treatment paid for by your employer would be an assessable benefit.

*For more help with finances go to www.warings.co.uk or call 01204 534031 or email PAL@Warings.co.uk