CHRISTMAS is a time of giving, so it’s only natural that some bosses might want to show staff their appreciation with a small gift this festive season.
But Alan Masson, head of tax at SBP Chartered Accountants and Business Advisors, warned that giving certain types of presents could have detrimental effects on a company.
Mr Masson said that companies who want to give members of staff a Christmas bonus – either by cash or cheque – should remember to follow the correct procedures.
He explained: “It needs to be treated as a net payment and should go through the payroll system with tax and National Insurance Contributions (NIC) payable on the grossed up equivalent. This is the case if it is paid at Christmas, or at any other time of the year.”
SBP delivers accountancy services, including personal and business taxation, as well as a dedicated Business Services Department covering everything including bookkeeping, VAT and payroll requirements.
“A common misunderstanding among companies is that vouchers can be given to staff tax free, but unfortunately the Inland Revenue also view these as being the equivalent of cash.
“Vouchers that can be exchanged only for goods or services are benefits in kind and are required to be included in form P9D or P11D on the basis of the cost of providing the voucher.
“They should be put through the payroll for NIC only. Most vouchers are therefore liable to tax and NIC, although there are some specific exemptions that can be found on HMRC’s website.”
Mr Masson added that most gifts are chargeable to tax and NIC but there are some seasonal gifts that HMRC class as ‘trivial’, and therefore are not chargeable.
“Their view of this is a turkey or one or two bottles of ordinary wine. Anything lavish in quality or quantity – the turkey and the wine for example, or a very expensive wine – remains chargeable in full as a benefit.
“Hampers would certainly be classed as chargeable benefits – as would anything else not regarded as ‘trivial’ by HMRC.”
Alternatively, employers could treat staff to a festive night out without the worry of any extra charges.
Mr Masson concluded: “Annual parties at Christmas or an alternative function of a similar nature, which is open to all staff generally, and where the cost is no more than £150 per head can be provided by the employer without a benefit in kind charge arising on the employees.”
SBP Chartered Accountants and Business Advisors has more than 30 staff at its four branches in the North-east based in Aberdeen, Peterhead, Banff and Fraserburgh.
For more information visit www.sbp-ca.co.uk.
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Contact: Donna Ross