Member Article

Christmas can be taxing for business owners

Business owners are being warned not to forget the tax implications of providing parties and giving gifts this Christmas and New Year.

Although employee entertaining (which this time of year often means Christmas parties) costing up to £150 per head (in total) is exempt from tax, HM Revenue and Customs (HMRC) generally sees gifts to staff as a taxable benefit. There is, however, an exception for what are deemed as ‘trivial’ gifts so it is worth having the guidelines for what a trivial gift is well wrapped up to ensure goodwill doesn’t cost more than intended.

Carol Chleboun, tax director at PricewaterhouseCoopers LLP Newcastle, said: “Businesses need to be careful with their gifts. While HMRC accepts that trivial gifts are not taxable, if the gift is regarded as a reward for services, or it’s a gift of money or a voucher, then it will be.

“Seasonal gifts are, however, specifically listed by HMRC as the type of gift which could be regarded as trivial. And a trivial gift can be more than you think - it includes items such as a turkey, a bottle or two of ordinary wine or a box of chocolates. But a case of wine or a hamper is not trivial and would be a taxable benefit. If you’re unsure don’t spoil the festive season by landing an unexpected tax bill, check with HMRC.”

Certain gifts to customers are tax deductible for the business if they don’t exceed £50 but this doesn’t include gifts of food, drink or vouchers exchangeable for goods.

This was posted in Bdaily's Members' News section by Ruth Mitchell .