Christmas Turkeys

As the holiday season approaches a local firm of accountants warns employers and employees to beware of potential tax liabilities which could be lurking within those festive gifts and parties.

"It is traditional at this time to give gifts to clients and staff", said Marcel Grech Marguerat, senior tax partner at chartered accountants MacIntyre Hudson. "Gifts to customers are not taxable for the recipients but they are an allowable business expense provided that the total cost of gifts to any one person in any year does not exceed £50 and the gift bears your corporate branding. However, gifts of food, drink, tobacco or vouchers are not deductible expenses. There are also VAT implications so beware!"

"Giving vouchers to employees in particular can be a tax nightmare. National insurance is due via the payroll at the time of giving the voucher and for tax purposes they need to be reported on forms P9D or P11D. It is possible however, for the employer to pay the tax for the employee via a PAYE settlement agreement."

Marcel continues "The annual Christmas bash is another area to take care. As long as the cost does not exceed £150 per head there is no taxable benefit. However should the cost exceed this amount by just 1p the entire cost of the function becomes taxable. Remember this limit is for all functions throughout the year not just the Christmas party. Therefore if 2 events were held at a cost of £80 a head, for each employee attending both the entire cost of the 2 nd event would be taxable not just £10 above the £150 limit. VAT is also recoverable on the costs relating to the employees but not on their guests although there are ways of improving the position."

Most employees wouldn't thank you for a gift which landed them with an unexpected tax bill so it makes sense to plan your festive generosity effectively to make sure the seasonal spirit remains intact!"