There are many ways that an employer can reward their staff but remember, as with most things there are tax obligations to consider:
Christmas party
Your employees won't have to pay tax or national insurance if you meet all of the following:
• total cost does not exceed £150 per head, per year, This amount covers all events so if you have a summer party as well as a Christmas one, the £150 limit remains
• this figure includes VAT and any other costs such as drinks, accommodation and transport
• all staff working in the same location must be invited
• if the cost exceeds £150 per head -even by just £1- the employee will be taxed on the whole amount
• if the cost per head exceeds £150, you can come to an arrangement with HMRC using a PAYE settlement agreement (PSA). This allows the employer to pay the tax and NI on behalf of the staff.
Christmas gifts
By concession, HMRC will allow you to give employees gifts (but not cash) up to the value of £50 per year.
Christmas bonuses
The tax treatment of the bonus depends on:
• whether you give cash bonuses or goods (gifts) to an employee
• if you give goods to an employee, whether or not they can be resold for cash
• whether the employee is a director and how much they earn
The simplest form of Christmas bonus is to give someone who earns less than £8,500 a year goods that cannot be resold for cash. These are exempt and don't have to be reported to HMRC. These include anything with your logo on it and little else.
Cash bonus
Any cash Christmas bonus counts as earnings, so you’ll need to deduct PAYE tax and Class 1 NI through payroll.
Goods
If you give goods as Christmas gifts, what you have to report and pay depends on:
• whether or not they can be resold for cash
• whether you give them to company directors or employees who earn more than £8,500 a year
Contact us for further guidance: Alastair Byrne, 01757 703731 / 01904 717260 / ajb@jwpcreers.co.uk
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