Staff Gifts - Our 3 Favourite Tax Saving Tips
The tax rules regarding benefits in kind (including staff gifts) have been reviewed and will come into force from April 2016. The main change is that expenses incurred on behalf of the company and reimbursed by the businesses do not need to be included on an employee’s P11D.
In the meantime, you're stuck with the current rules until April 2016. How do they relate to Staff Gifts?
If your company makes a gift to a member of staff they will be taxed on whatever it cost to provide it. And that's not just the cost of the item itself; any associated cost such as delivery charges will also be taxed.
So, is there any way around these rules on staff gifts?
What Are Staff Gifts?
You will be pleased to know that the Taxman has a concession relating to staff gifts.
This concession allows the Taxman to ignore staff gifts made to employees when he considers them "trivial”.
Typically, this concession applies to seasonal gifts to staff such as a hamper or bottles of wine at Christmas. And there's even better news - it can also extend to staff gifts for other situations, for example, a birthday or wedding gift your company wishes to make to a member of staff.
From April 2016 the Taxman has quantified what he considers to be trivial in relation to gifts. Gifts up to a value of £50 in any one tax year will not eye considered a benefit-in-kind and taxed accordingly.
For now we have to use our common sense concession when considering what trivial would mean in practice with staff gifts.
We think we're safe in saying that a birthday gift costing £50 would not cause a problem. Perhaps staff gifts of greater value, say £100, they might be considered trivial for a member of staff or a director if they were getting married or retiring.
Our 3 Top Tax Tips For Non-Trivial Staff Gifts!
But, the gift bonanza doesn't have to stop there. Suppose you have an employee or director who has 20 years of service. You could give them staff gifts to the value of £100, but this might seem a little mean after so many years of loyal hard work.
So, is there another way in which they could be rewarded without incurring tax as a benefit-in-kind?
- Staff Gifts tax tip 1 - EIM01500 provides the details of a tax-free gift of much greater value. The main condition is that the person receiving the gift must have worked for the Company for 20 years or more. In addition you must not reward them in cash or vouchers that can be converted into cash, and cannot exceed £50 for each year of service. Therefore you can provide a gift to the value of £1,150 for someone with say 23 years service.
- Staff Gifts tax tip 2 - For your really long-serving employees there's an additional bonus. More than one long-service gift can be made to the same person. However you must make sure there are at least ten years between each gift. So, this could apply to an employee with 30-years service. Tax-free staff gifts of £1,500 could be made every 10 years for an employee with such a long service record.
- Staff Gifts tax tip 3 - Make sure you keep good records of the reason for the gift. You don't need to inform the Taxman that you are making the gift, however, should you have a payroll inspection it's likely you'll be asked why the employee receive a tax-free payment. Good notes kept in the payroll files will help you through such an inspection.
Our Staff Gifts Call To Action
If you know of any other great staff gifts tax tips that can be shared with our readers then let us know via the comments or through LinkedIn.
Don’t be shy about claiming for “trivial” and legitimate staff gifts (as above) from the tax man. It is good for you, your bottom line and your business!
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