So it will soon be time to start thinking about putting up the tree and making sure your staff are looked after this Christmas.
Are you organising, and paying for, a work Christmas Party for your staff? If so, there are National Insurance and HM Revenue and Customs (HMRC) reporting obligations to think about!
What do I need to Report?
What you need to report and pay depends on:
- if it’s an annual event
- if it’s open to all of your employees
- if it costs more than £150 per head
- how many events you provide during the tax year
- whether the employee is a director, and how much they earn
If your business has more than one location (eg an office in Cardiff and an office in Newport), an annual event that’s open to all of your staff based at one location eg Newport still counts as exempt. You can also put on separate parties for different departments, as long as all of your employees can attend one of them.
One thing you need to take into consideration is if you have more than one annual event each year eg Christmas Party and a Summer BBQ. The two combined need to be under £150 per person.
If the staff pay for their Christmas party through salary sacrifice, you do need to report this. If the costs of the events are less than the amount of salary given up, report the salary amount instead.
What if my party isn’t exempt?
If any of the events you provide aren’t exempt, you’ll have to report the costs to HM Revenue and Customs (HMRC) and pay National Insurance on them.
- report on each employee’s form P11D
- pay Class 1A National Insurance on the full cost of the event
- What if my annual events are over £150 per head combined?
- However, you’ll have to report and pay on the full costs of any additional events that go over this limit, even if they cost less than £150 per head on their own.
Can I claim back VAT?
The good news is yes! You can. The VAT man defines Staff or Employees for this purpose but excludes partners or former employees. So you may need to apportion the amount of VAT you claim back.
If your party is just for the Directors, Partners or Proprietors you won’t be able to claim back the VAT.
Tax Free Christmas Gifts to Employees
Thinking of giving gifts to your staff as well as a party? HMRC allows you to give small gifts to employees tax free. Which is ideal when it comes to Christmas Time.
These small tax free gifts are called ‘Trivial Benefits‘. For a gift to be a trivial benefit, the gift must:
- cost £50 or less to provide;
- not be a cash or a cash voucher;
- must not be a reward for their work or performance;
- not part of the terms of their contract.
So if you are thinking about giving your staff a Christmas Gift of a bottle of wine or box of chocolates for example, HMRC won’t tax them. A £100 gift voucher, wouldn’t be classed as a trivial benefit, and would would be classed as a Taxable Benefit. Your employee must then pay tax on the gift value, and you would need to pay Employers National Insurance. This can get very confusing, and create lots of extra paperwork. One simple way is simply giving staff a bonus paid through the payroll system, which will be taxed along with their pay.
Still confused? Why not speak to an expert? Choice Bookkeeping Limited, based in South Wales, and with offices in Newport and Pembrokeshire, can help you with tax matters, VAT returns, preparing your annual accounts, general bookkeeping as well as setting up and managing your payroll and PAYE services. Mark and the team at Choice Bookkeeping here to help with all your bookkeeping needs. Whether you are a sole trader, or a limited company, Choice Bookkeeping are the ones to call! You can visit their website here.