REWARD
Sarah Smith MCIPPdip, CIPP policy and research officer, shares top payroll tips for employers offering festive gifts and events for their workforces
W e all know Christmas can be a very expensive time for everyone, but what are the implications for employers that provide festive gifts or celebrations? It’s essential that employers and payroll professionals understand the true cost of gifts and events and what needs reporting to HM Revenue and Customs (HMRC) to avoid any unnecessary fines or penalties. Almost everything that an employer provides to employees is classed as a benefit these days, attracting tax and National Insurance (NI) liability. However, there are some exemptions that can help keep tax costs down. Gifts Section 323a of Income Tax (Earnings and Pensions) Act (ITEPA) 2003 (see https://ow.ly/LyA050TUVXH) specifies the exemption of a trivial benefit, allowing an employer to provide a gift to employee that is exempt from tax and NI. This exemption is not limited to Christmas gifts since trivial benefits are provided for many reasons, including a gift for the birth of a baby, when an employee gets married or a milestone birthday. Whatever the reason, all the following statements must apply:
“Trivial benefits don’t need to be reported to HMRC and there’s no set limit on the number of trivial benefits that can be provided in a year. However, the maximum amount that directors of ‘close’ companies can receive in any tax year is £300”
l the gift is no way linked to any contractual obligation
264 of ITEPA 2003 (see https://ow.ly/ A0P050TUW4o). Any type of social event or party provided by an employer can qualify as non-taxable benefit if: l the event is accessible to all staff l the total cost of an event, inclusive of value added tax (VAT), is less than £150 per head. Calculate the cost per head The cost of any event must include: l the full cost of providing the event, including venue, entertainment, decorations food, drinks etc l all transport and accommodation provided l any VAT payable.
l the gift is not cash or a cash voucher l the gift cost the employer less than £50 to provide l the gift is not in recognition of service or in any way related to work performance. Trivial benefits don’t need to be reported to HMRC and there’s no set limit on the number of trivial benefits that can be provided in a year. However, the maximum amount that directors of ‘close’ companies can receive in any tax year is £300. Party time A tax exemption for Christmas parties falls under annual events, specified in section
| Professional in Payroll, Pensions and Reward | December 2024 - January 2025 | Issue 106 41
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