Guide to Purchasing Gifts

A £50 gift to yourself and your staff!

If you are a Limited company, then you can give yourself a gift at Christmas as the company is giving the gift and not you! You can also give gifts to your employees. The limit is £50 and counts as a trivial benefit exemption so no Tax or NI is payable. This does not apply to cash – so it must be a gift. Vouchers not exchangeable for Cash up to £50 may be exempt under the trivial benefit rules. Where the voucher exceeds £50, you will need to report these on a P11D form to HMRC. So, a couple of bottles of wine and some chocolates would count as a trivial benefit.

If you spend more than £50

Buying a gift that costs more than £50 (and this includes delivery charges) will count as a taxable perk for the employees that receive it. They will then have to pay tax and you as the employer will have to pay National Insurance. For example, if you were to give a £60 gift it will cost you a total of £85 because of the tax and NI due.

The gifts must carry a clear advertisement for the business (e.g. with branding or logo) which must be on the gift itself, not just the wrapping. They can’t be alcohol, food, drink, tobacco (unless they are your business) or vouchers. Non-promotional gifts and larger gifts are classed as entertaining and are not tax-deductible as an expense.

VAT and gifts

If you are not using the Flat Rate Scheme you are able to reclaim the VAT incurred on purchasing the gift. But you may, however, have to account for VAT on the value of the gifts if the gifts received by the recipient are more than £50 in a year. If a gift is exempt or zero-rated (i.e. a book) you will not have to account for the VAT.

Gifts for your clients – direct tax deductions

Cash bonus

Any cash (or cash equivalent) gift you give to employees as a Christmas bonus for example counts as earnings, so you’ll need to:

· Add the value to your employee’s other earnings

· Deduct and pay ‘Pay As You Earn’ (PAYE) tax and Class 1 NI via payroll

Virtual or in person Christmas Party

There is an allowance of £150 per employee for a Christmas party. Since the pandemic if you decide not to have an in person Christmas event HMRC will still let you have a virtual Christmas party and you can still have the £150 allowance per employee.

The costs can include food, drink, virtual pantomimes, online entertainment events and postage costs. The VAT is reclaimable, but only for the staff costs, not partners.

Get in touch

If you would like further information on these areas please contact one of the team.

Phone: 01508 333040

Email: office@abcabacus.co.uk

Website: abcabacus.co.uk