Christmas is fast approaching, and many business owners think about treating their staff and customers at this time of year ...
When it comes to gifting, there are two sides to taxation. For the giver and for the receiver. For you (the giver) it is vital that you don't go crazy with your generosity or you could be hit with a National Insurance and Income Tax bill.
If your gift is worth more than that then it will be taxed as a perk for the employee. They will have to pay Income Tax (unless you agree to pay it on their behalf) and you will have to pay Class 1A National Insurance. So, a £60 gift would end up actually costing £85 instead. And it has to be a proper gift to get the exemption, just giving them cash doesn't count.
For clients, again the £50 gift limit applies, and it must not be part of a series of gifts to the same person within the same accounting period. Sadly, you can't give them tobacco, food or drink because the exemption doesn't apply to them.
Remember that you must account for VAT on gifts. The rules on VAT for client gifts is the same as that for employees. You must account for VAT should gifts exceed the £50 limit!
To HMRC, Christmas is just another day. They don't consider it to be a festive time so you have to be careful with gift-giving and ensure you account for every penny.
Otherwise, you may face the unwanted attentions of the taxman when you file your next returns.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.