There’s no better time to reward staff and customers than at Christmas. But the tax man is less generous than Santa and there are certain clauses you need to be aware of before you start popping £50 notes into envelopes to hand out over mulled wine round the office tree.
- Client entertaining is never an allowable deduction for business tax purposes and input VAT cannot be recovered on it.
- Business gifts to customers are only allowable as a tax deduction if the total cost to one individual per year is less than £50, the gift bears a conspicuous advert for the business and it isn’t food, drink, tobacco (unless they’re samples of your products) or exchangeable vouchers.
- Gifts to staff: In some cases HMRC will consider a benefit exempt on the grounds that the cash equivalent of the benefit taxable on the employee is so trivial as to be not worth pursuing. HMRC has conceded a seasonal gift such as a turkey, bottle of wine or box of chocolates can be exempt. However, a case of wine, a bottle of fine wine or a hamper is unlikely to be considered trivial. Strange but true: this concession applies to seasonal flu jabs though your employees may not be quite so appreciative of the ‘gift’
- Vouchers:these are subject to tax and National Insurance
- Inheritance tax issues:All individuals have an annual exemption of £3,000 for gifts. Gifts of less than £250 a year to each individual are exempt. Any gift above these amounts could be considered a Potentially Exempt Transfer which is exempt from Inheritance Tax provided the donor survives for seven years. All gifts to spouses are exempt for Inheritance Tax purposes.