Gifts and events are all part of the build-up to Christmas and it feels good when you can reward the loyalty of staff and customers ...
Doing this allows you to leverage your money and keep HMRC happy and on your side. So, let's look at some ways to reduce your tax bill this festive season:
Yes, you can give your customers gifts, but the total you spend on them in any one year has to be less than £50 and they must contain an advert for your business. Whether that is an included card or branding on the gift itself is up to you. Oh, and you can't give food, drink or alcohol unless they are samples of the products you sell.
You can only entertain customers and clients if entertainment is part of what you usually do. So, if you offer training courses, then teas, coffees and lunches are ok. Otherwise be very careful. It is possible to claim back a lunch if you're picking someone's brain as part of a research project, but do make sure you keep plenty of documentary evidence to keep HMRC happy.
You're allowed to spend £150 per head, so for everyone who attends - employees, spouses suppliers or customers - only spend up to that limit. It's an exemption, not an allowance, so if the total bill comes to £151 per head then you have to pay tax on all of it! Be careful with the directors sloping off to a club afterwards as company money they spend is included in the final per head price.
You can award your staff for great suggestions or for hard work in the previous year. Encouragement awards are tax-free up to £25. But financial benefit awards are exempt up to £5,000. There are conditions though, so be careful.
Only gifts that a deemed 'trivial' by HMRC are exempt from tax and NI. They must have a value less than £50 and not be part of the employee's financial package. Oh, and it can't be a cash gift either, so you have to actually buy them a gift.
Non-cash vouchers up to the value of £50 are ok, so where they can't be cashed in then they don't have to go through payroll as they're classed as non-trivial too. Exceed that amount and they must be declared on a P11D.
Gifts between family members are subject to Inheritance Tax, however, if the person making the gift survives for seven years after making the gift then it becomes exempt. Remember, there is an annual exemption of £3,000 and a small gift exemption of up to £250 a year.
If you want to ensure all of your employees are still with you in the new year, why not offer a share scheme or other tax-efficient measures in their remuneration package? Even a simple thing like a 1/2 day for Christmas shopping can help boost morale.
If you have a long-serving employee and you decide it's time for them to move on, the end of the year could be a good time to say goodbye. You can give them a non-cash award of up to £1,000 if you meet certain conditions.
Talk to your accountant! Now, is a great time to be planning for the new year and even though they will be busy with tax returns I'm sure they'd be happy to talk to you and offer you some great advice.
As this is my last blog post of 2018, I am going to sign off by wishing you all a healthy and happy Christmas. Do remember the true meaning of Christmas and enjoy your time with those close to you.
If you feel inspired to find out more about anything I've said here, do call me on 0333 335 0453 or leave a comment below and I'll be in touch as soon as I can.