Tax on Staff Gifts

We all know that showing appreciation of your staff’s efforts is valued and with Christmas just around the corner it is a special time to enjoy some festive cheer in our working environments.

If you are planning on giving a gift to your staff, care needs to be taken to ensure you do this in the most tax efficient way – making sure any taxable benefits are properly declared. Going about this the right way means you can give tax free benefits to your staff and obtain tax relief for the practice.

Cash Bonuses – If you treat your staff to a cash bonus this must be put through the payroll and the appropriate tax and national insurance must be deducted.  Unfortunately there is no “de minimis” or “exemption” to this rule, all cash is taxable.  Any cash bonus can be “grossed up” through the payroll though so the member of staff gets the required £50 for example in their hand after tax.

Gifts – If you provide non cash gifts to your staff such as a bottle of wine, chocolates, flowers, high street gift cards etc there are no tax implications providing that the gift is considered to be ‘trivial’ by HMRC.  There is now a statutory limit of £50 for ‘trivial’ gifts so anything up to this limit can be gifted tax free without any declaration needed to HMRC.  If you have made gifts, or plan to make gifts to your staff in excess of this amount, these gifts are likely to be taxable.

PAYE Settlement Agreements – Your staff will appreciate the nice Christmas hamper you gave them, or the £100 Marks & Spencer gift card you gifted to them.  Something they will not appreciate quite as much however, is the tax bill from HMRC on their Christmas gift if it exceeds the £50 “trivial” gift exemption.  If you would like to continue your generosity and foot the tax and national insurance bill yourselves you can set up a PAYE Settlement Agreement with HMRC.  We can of course deal with this on your behalf.

Entertainment – You can entertain your staff without causing them a tax liability.  You can spend up to £150 per year per head without any tax implications.  This limit will include the Christmas party, the summer barbeque and any other similar annual functions.  The limit is £150 “per head”, so £300 per member of staff if partners are invited.

If you would like to discuss staff benefits please call Hannah Williams on 01768 864466 or Paul Newsham on 01228 530913.