Christmas gifts of up to £50 to employees

Certain gifts to staff at Christmas are tax free if structured correctly. Since April 2016 employers have been allowed to provide directors and employees with some “trivial” benefits in kind tax free.

The rules were brought in as a simplification measure so that certain benefits in kind do not now need to be reported to HMRC as well as being tax free for the employee. There are of course several conditions that need to be satisfied to qualify for the exemption: –

• The cost of providing the benefit does not exceed £50
• The benefit is not cash or a cash voucher
• The employee is not entitled to the benefit as part of any contractual obligation such as a salary sacrifice scheme
• The benefit is not provided in recognition of particular services performed by the employee as part of their employment duties or in anticipation of such services

This exemption will generally apply to small gifts to staff at Christmas, on their birthday or other occasions and includes gifts of food, wine and store vouchers.

Note that where the employer is a “close” company and the benefit is provided to an individual who is a director or other office holder of the company, the exemption is capped at a total cost of £300 for the tax year.

A “close” company is a limited company with five or fewer ‘participators’ or a limited company in which all the ‘participators’ are also directors. For most small limited companies ‘participators’ just means shareholders.

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