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Spread the taxfree Christmas cheer

Wednesday 29 November 2017. With the dark nights closing in and the festive season getting closer, the ICAEW is reminding businesses of some Christmas joy. If you are an employer, don’t forget you can treat your staff to a tax-free Christmas party up to the value of £150 per employee. Each year HMRC’s seasonal gift allows businesses an annual tax-free allowance that can be used for food, drink and even accommodation and travel.

Sarah Ghaffari, ICAEW Technical Manager, SME Business Tax, explains:

“A Christmas party is a great way to reward staff for hard work, and as a little festive gift, HMRC allow up to £150 spend per employee completely tax free. Employers can use this money to fund any aspect of the party, including food, drink, travel and accommodation. However, if the £150 limit is exceeded, businesses will no longer be entitled to the tax free status and will be liable for income tax and national insurance. The party invites can be extended to partners as well, providing that the cost per head is kept under the limit.

“The Christmas tax exemption can be enjoyed by businesses of any size, so long as within the £150 budget.”

Sarah continues: “As of last year, employers can add to their generosity with the trivial benefits exemption. If a gift costs less than £50, it can be considered trivial and therefore may be entitled to tax free status. So, bosses can now not only treat their employees to a Christmas party, but add a little gift to that as well. It is important to remember however, cash gifts, such as a Christmas bonus or vouchers redeemable for cash, have to have tax and national insurance contributions paid.”

Gifts won’t be entitled to the tax exemption if:

  •  The cost of providing the benefit exceeds £50
  •  The benefit is cash or a cash voucher
  •  The employee is entitled to the benefit as part of a contractual obligation (including under salary sacrifice arrangements)
  •  The benefit is provided in recognition of particular services performed by the employee as part of their employment duties.

 

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Please direct all media inquiries related to this article to:

Caroline Florence - ICAEW press office
Tel: +44 (0) 207 920 8564
Email: Caroline.florence@icaew.com