Whether business gifts are tax-deductible or not, all depends on what the gift is, how much it is worth and to whom it is being given to. We have broken it down below to help you understand the ins and outs of this tax legislation.
Tax on cash bonuses & vouchers
Christmas presents paid in cash to staff will be taxable through the payroll in the normal way. As will vouchers exchangeable for cash, with the employee, taxed on the full value of the voucher.
Non-cash vouchers
Vouchers exchangeable for goods and services are also taxable and must be reported on the employee’s form P11D. Class 1 national insurance will need to be deducted through the payroll.
This often gets overlooked, you must inform your payroll dept or payroll provider so the correct entries can be made.
Tax on Christmas gifts
Some businesses give their employees gifts such as a turkey, a bottle of wine or a box of chocolates. Provided the cost of the gift is ‘trivial’ (less than £50 a head), it will not be taxable.
If it exceeds this value, it will be taxable and it will need to be reported to HMRC via the P11D.
Gifts for customers and suppliers
Are not tax deductible and no vat can be claimed on these items.
Tax on gifts from customers and suppliers
Employees may receive gifts from third parties as long as it doesn’t exceed £250 in cost if it does it will be taxable.
If you have any questions please give our tax department a call.
