As we enter into the time of year when you may want to provide gifts to your employees (such as wine or hampers), it's good to be reminded of the rules so you can take advantage of the maximum benefit values without incurring additional tax.

If a gift meets the full criteria below, this is known as a "trivial" benefit, you don't need to let HMRC know - and you won't need to pay National Insurance Contribution (NIC) or tax.

The gift meets the criteria if:

it costs £50 or less to provide (or an average cost per employee if the benefit it provided to a group of employees and it is impractical to work out the exact cost per person)
•    the benefit isn't cash or a voucher
•    it isn't a reward for work or performance
•    it isn't in the terms of their contract
If your gift does not meet all of the above points, then it must be taxed in the normal way and it is subject to any other exemptions or allowances. Where a gift exceeds the £50 limit, the whole value of the gift becomes taxable and not just the excess.

Exemptions for Directors

For Directors of ‘close companies’, there is an upper limit of £300 per Director in a tax year - although each individual gift is still subject to a £50 limit. The limit of £300 per Director is annual and cannot be rolled forward.

Christmas Parties - virtual parties now also included!

An employer can host an annual event (it doesn't have to be held at Christmas!) costing less than £150 per head without having to pay the associated tax and NIC costs - as long as all employees are invited (or all employees based at one location).
However, all costs relating to the event must be included as part of the calculation "per head". This could include:

•    Entertainment
•    Food and drink
•    Transport and accommodation
•    VAT

This list is not exhaustive - all costs associated with the event must be included and if the total cost is higher than the £150 per head then the whole amount is taxable. Costs for individuals who are not employed by the company (such as spouses), must also be taken into consideration when calculating the ‘per head’ value.

If more than one party is hosted, the cost per head must not exceed £150 in total.

Where all of the above conditions are met, HMRC has now confirmed that the exemption will apply to any virtual office Christmas parties.

We are here to help...

We are here to help in any way we can - please speak to your usual Jerroms contact on 0121 693 5000 (Solihull Office), 01384 250202 (Halesowen) or 01675 466344 (Coleshill Office).