It's nearly Christmas, what can I do to treat my staff and customers?
Laura Arbuckle • December 13, 2019
The festive season is right around the corner and everyone is gearing up for the big day so I thought it would be useful to give a quick round-up of ways in which businesses often indulge a little – and what this means from a tax perspective (bah humbug!)
Can I throw a Christmas party?
Unfortunately, entertaining your clients with a party is never an allowable expense. However, as long as you meet the criteria below, entertaining your employees is. What’s more, the employees themselves don’t have tax to pay on the benefit. In order for the party to qualify, it must be an annual event (so it doesn’t necessarily have to be Christmas) that is open to all staff and costs under £150 per head. If the cost ends up being more than £150 per head, the whole thing will become taxable. If you are VAT registered, you can also claim back any VAT suffered on your employee Christmas party so long as you invite employees only.
You do need to be a little bit mindful of the definition of employees. This means someone who is currently on your payroll and being paid a salary. It does not include shareholders, contractors or former employees.
Despite them being employees, HMRC don’t allow entertainment just for directors so if your only staff are directors, then your Christmas party event is never an allowable expense. Similarly, sole traders and partners are not employees and therefore can’t claim this type of expense for themselves.
Can I give my employees a Christmas gift?
HMRC make a provision for giving trivial benefits to your employees which you can use to purchase Christmas gifts. The gift must cost under £50, it must not be cash, not stated in the terms on the employee contract and not a reward for work or performance. If all these requirements apply, the gift is an allowable expense and isn’t a benefit in kind for the employee.
Can I send Christmas cards to my customers?
Sending a Christmas card to your clients is an allowable expense so long as the card features your logo or some other kind of advertising alongside it.
Can I give my customers a gift?
Similar to your employees, you can send your clients a small Christmas gift of a value up to £50. However, in order for a gift to someone that is not your employee to be an allowable deduction, the gift must not be food, drink, tobacco or a voucher and it must carry a visible advert for your business.
Can I buy some Christmas decorations for my workplace?
So long as you don’t work from home, even decorating your office for the festive season is an allowable expense so there’s no excuse for a drab office this year!
With the above in mind, hopefully you are clearer about what you can do, and the tax consequences of doing it. Now that we’ve sorted that out – mince pie anyone?
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