Christmas is nearly upon us, have you started to decorate the house, do Christmas crafts and buy Christmas gifts? There is not a lot more we can do in these lockdown days, so why not! If you plan on giving gifts to customers from your business, then read on for a brief summary of some rules to consider.
There is also a little tip for the Limited company owners amongst you that you can use this Christmas and indeed throughout the year.
Maybe you are considering giving gifts to your customers or suppliers, or people in your networks? Here are some points you should consider when deciding on what to gift;
A gift for the purpose of entertaining is not allowable for tax, such as event tickets;
A gift of a sample is an allowable product promotion or merchandising cost;
A gift of alcoholic drinks or food are not allowable unless they fall under the category of product samples;
Branded gifts are generally classed as advertising or promotional costs, for example, a notepad, diary, calendar, keyring or mug.
A gift cannot cost more than £50 per head.
However, regardless of the rules, if you wish to make a gift that is not tax deductible, you can. The old saying amongst accountants is ‘do not let the tax tail lead the dog in all decisions’. In such cases, you should speak to your accountant to see if any other areas of tax are affected.
Tips for Limited Company Owners
In the spirit of giving, owners of Limited companies should be aware of some of the Trivial Benefit Rules. You can potentially have 6 x £50 gifts throughout the year, totalling £300.
So how is this beneficial? Well, it is a deductible expense, meaning it saves you corporation tax. In addition, it is a way of drawing funds from the company without having to pay via PAYE or tax on dividends. Finally, trivial benefits do not need to be reported on a P11D.
As always, HMRC guidance on this is strict and rules to consider are that each gift cannot be of a value over £50, not even a penny, and it cannot be cash.
So treat yourself or a family member to flowers, chocolate, a meal or if you cannot think of anything then a gift card to the value of £50. – just ensure you make your accountant aware this is a trivial benefit so they treat it correctly in your year-end accounts.
Virtual Christmas Party?
A note for those who would usually host a Christmas party for employees or indeed attend as an employee. HMRC have confirmed this week that the rules related to a traditional party can be applied to a virtual party! Not the same I know, but it is another way to reward employees in these times, a zoom quiz with takeaway and a bottle of fizz on the boss sounds like fun!
So, to finish, I hope you all have a great December and a positive end to the year. I wish you all a happy Christmas and holidays.