It’s the season to celebrate and give to those we value. From a business perspective, taking the time to show your appreciation for your staff can boost morale and improve employee satisfaction which will ultimately create a more positive working environment. But what are the best ways to reward staff at this time of year?
Christmas parties
As the festive season is upon us, employers may be looking to organise a Christmas party for staff.
Staff entertainment is eligible for tax relief and input VAT can be reclaimed.
‘Staff’ means a person on the business’s payroll and someone who is being paid a salary, therefore previous employees and subcontractors are not included.
This qualifies as a tax-free benefit and is therefore exempt from reporting, providing the following criteria are met:
Open to all employees
Annual events, such as a Christmas party or summer BBQ
If the employer has more than one location, employees can be invited to one location, or separate events can be held for different sites/departments, provided all employees are given the option of attending one event at least
Cost £150 or less per person – this is a threshold and not an allowance so if the event exceeds £150 per head, there is no exemption available for the first £150
The costs should be recorded for all elements of the event and the number of attendees
The £150 limit includes any related travel and accommodation costs
The exemption can be split over two events as long as £150 is not exceeded in a tax year. For example, a Christmas party costing £100 per head and a summer party costing £40 per head
If the Christmas party was £130 per head and the summer party was £40 per head, the exemption could be used against the Christmas party as this incurred higher costs. The summer party would then be treated as a taxable benefit
Note: the above also applies to online/virtual parties
Gifts
An alternative to providing a party might be to give a gift to the employee, such as a Christmas hamper or non-cash voucher.
These could be covered by the ‘Trivial Benefit in Kind Exemption.’ If so, there are no tax and National Insurance liabilities for either the employer or employee.
Conditions to meet are:
Cost to be a maximum of £50 (incl. VAT and delivery)
Not cash, therefore a Christmas bonus does not qualify
No contractual obligation exists
Not provided in recognition of services performed
Awarded to staff for welfare purposes or wholly personal grounds
For more information about tax-free benefits and the best way to reward your staff this Christmas please get in touch on 0808 144 5575 or via email; help@armstrongwatson.co.uk
