Remember Christmas Gifts of up to £50 per Employee are Tax Free

Employers should note that certain gifts to staff at Christmas are tax free if structured correctly. Employers are allowed to provide their directors and employees with certain “trivial” benefits in kind tax free.

This exemption applies to small gifts to staff at Christmas where the cost to the employer is no more than £50, this is in addition to gifts on their birthday, or other occasions and includes gifts of food, wine, or store vouchers.

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 service
• The exemption is an ‘all or nothing’ exemption: if the value of the benefit is £60 then the full amount of £60 is taxable, not just the £10 excess.
• The exemption also applies to former employees.

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.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

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