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Staff Christmas parties & gifts

Mike Wakeford

‚ÄčThere has, for many years, been an exemption for small and seasonal gifts made by an employer to its employees such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. In addition, employers have always been able to rely on the annual staff function to exempt Christmas parties (provided the combined VAT inclusive cost of any such functions remains below £150 per head). But now, following the introduction by HM Revenue & Customs of new trivial benefit rules, from 6 April 2016, other staff gifts  might now qualify as a trivial benefit if the cost per head is below the specified VAT inclusive £50 limit. In order to qualify for the exemption, the gift cannot be part of any reward for services, nor can it be in the form of cash or vouchers capable of being converted into cash.

 In general, for a benefit to qualify for the trivial benefits exemption, all of the following tests must be met: 
•    the benefit is less than £50 
•    the benefit is not cash or a cash voucher 
•    the employee is not entitled to the benefit as part of any contractual obligation 
•    the benefit being provided is not in any way a reward for services performed

 To avoid smaller companies taking advantage of this, any benefits provided to directors or other office holders (or their families) have the exemption capped at a total cost of £300 per tax year.

 So employers who might prefer to give store gift card vouchers to their staff at Christmas can now do this and benefit from the exemption.  You should always check that the vouchers cannot be redeemed for cash as that will mean they do not qualify for the exemption.  Other staff entertaining that does not qualify for annual function exemption might also be given trivial benefits treatment if the cost per head is below the £50 limit.

 This will be good news for employers who put on more staff events than the annual Christmas party.