As a business owner, you must be thinking about celebrating this year’s Christmas with your staffs and clients as a way of showing your appreciation. But, before you make any plans, it is best to be aware about the expenses with tax implication in advance.

Christmas parties
Usually, the cost of a staff party for the employers is considered as tax deductible. But, this deduction is only allowed for the businesses under following conditions.

• The party must be open to all employees
• The cost per head should not exceed £150 inclusive of VAT. In addition, the cost per head must not exceed £150 if more than one annual function is provided.
• If the cost exceeds £150 per head then, the total cost will be taxable. It must also be noted that total cost from the start to the end is the cost of the party.
• The total cost of the party includes any transport or accommodation provided.

Gifts for staffs
If you provide trivial gifts like turkey, ordinary bottle of wine or box of chocolates to your employees, HM Revenue & Customs (HMRC) will not impose tax on them and are considered as exempted benefit. However, gifts like Christmas hamper and vouchers will be subjected to tax.

Gifts for clients
The gifts you make to clients are given tax relief if the total cost of the gift to any one individual does not exceed £50, the gift contain a conspicuous advert for the trader and is not a food, drink, tobacco or exchangeable vouchers..

Christmas bonus for staffs
If you give a cash bonus to your employees, it will be taxable because it will count as monthly salary and will be subjected to Pay As You Earn (PAYE) and National Insurance (NI). Similarly, when you give out vouchers to your staff, it will also subject to PAYE and NI.

With the festive season just around the corner, make sure you understand all of these expenses and their tax implications.

If you have more doubt about these Christmas expenses, get in touch and speak to one of our tax advisers today.