If you’re wanting to give your staff a little treat this Christmas then it’s worthwhile knowing the National Insurance and Tax implications to you and your employee.
HM Revenue & Customs (HMRC) deem gifts to be ‘trivial’ if:
- The cost does not exceed an average of £50 per employee (VAT inclusive)
- The gift is not cash or a cash voucher
- The employee’s contract does not entitle them to such gifts.
- It is not based on performance as part of their employment duties. So you can say, it’s Christmas, I’m feeling generous, here’s a gift. You can’t say, we are doing well and hitting all targets, so here’s a gift. The latter makes it performance related.
Trivial benefits and gifts are exempt from declaration and therefore do not attract Tax and National Insurance contributions. Things like Christmas hampers, Turkeys, chocolates and wine worth less than £50 are all good to give – all with no additional paperwork or tax to worry about. You can also claim corporation tax relief on the gift too!
One thing HMRC hasn’t limited in the new legislation is how often such trivial gifts can be given; so as long as it’s not in their contracts or performance based why not treat your staff a little more often? Richard Branson said if you take care of your employees, they will take care of your clients!
HMRC have introduced a £300 annual cap on trivial gifts for company directors and shareholders though, so don’t get carried away with treats for yourself!
Corporate gifts is a more complex area of taxation, and can have a knock on effect on tax and VAT. Please contact us if this is something you are considering.
This article is offered as a guide to seasonal employee gifts, and does not take into account individual employer or employee circumstances. Should you have any queries regarding employee benefits, payroll or general tax advice please contact us.