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Tax at Christmas


By: Colin Chamberlain Date: 12 December 2017
Category: Article,Tax

The Festive Season is upon us. Here are a few common Christmas topics and some of their direct tax implications.

Gifts to Friends and Family

Small gifts to friends and family of up to £250 to any one individual in a tax year are exempt from inheritance tax ie the donor does not have to survive the usual seven years before they fall out of the value of his or her estate. More expensive regular annual gifts may also qualify for exemption if they form part of regular expenditure and the donor’s lifestyle is maintained. Additionally, an individual is allowed to give away £3,000 a year and anything unused from the previous tax year can be carried forward one year.

Christmas Bonuses for Staff

Staff bonuses count as ordinary earnings and are subject to income tax and national insurance. The bonuses are deductible against profits for the employer.

Christmas Gifts for Staff

Gifts to staff are exempt from income tax and national insurance if they are trivial. Broadly, this means that the cost of providing the gift must not exceed £50 and the benefit cannot be cash or a cash voucher or provided in connection with a salary sacrifice arrangement or any other contractual obligation. The cost of the gifts are deductible against profits for the employer.

Staff Parties

The benefit of one or more annual staff parties and functions are exempt from income tax and national insurance, providing the cost to the employer for each person attending is not more than £150 including VAT. To qualify for the exemption, the party or function must be open to all employees. The cost of the party or function is deductible against profits for the employer.

Customer Entertaining

Customer entertaining is not deductible against business profits for tax purposes.

Gifts to Customers or Supplies

Tax relief is available to businesses on gifts to customers or suppliers costing £50 or less, provided they include a conspicuous advertisement such as a logo and are not food, alcohol, tobacco or vouchers.

Gifts to Charities

In respect of money gifts to charities by individuals, tax relief is available at the individual’s top tax rate under the gift aid scheme.

If you have any questions then please contact us.
 
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