In most cases any benefit that an employee receives will be taxable. The value of the gift needs to be declared on forms which are filed with HMRC annually. This blog is however about the few concessions that have been made by HMRC which aren’t treated as taxable. There aren’t many of them but when everyone is feeling the pinch any good news for employees is worth considering.
The first to consider is for those members of staff who have shown loyalty over a long time to you. Long service awards are allowed within strict limits. There will be no tax charge so long as the employee has been with you for at least 20 years and the article given has a value not exceeding £50 for each year of service. So for someone who has been with you for 20 years you could make a gift of something up to the value of £1,000.
If you have members of staff who make suggestions on how the business could make more money then you could consider some form of “Suggestion Scheme Award”. Such awards must be made under a properly constituted suggestion scheme, based on a set percentage of the expected financial benefit to your business. The maximum award allowed is £5,000. There is also a concession for ‘encouragement awards’ of £25 or less to reflect effort on the part of the employee that goes the extra mile for the firm.
Everyone enjoys a good party and in the run up top Christmas it is perhaps worth remembering the limits in place before they become taxable. Staff annual functions (e.g. a dinner dance or Christmas party) are tax-free where the total cost per person attending is not more than £150 per year (including VAT). So you could have more than one function but the total spend for all of the functions for the tax year must not exceed the limit of £150.
More and more people are looking at promotional gifts for marketing purposes and these too can be gifted to staff within certain limits. Such items are normally purchased for advertising purposes and must display a ‘conspicuous advertisement’. Staff may receive promotional gifts tax-free provided that the overall cost of the articles involved does not exceed £50 per person per year.
Gifts of food, drink, tobacco or vouchers are specifically excluded from any concession. This is important to remember as otherwise the gift even if it is within the broad limits will become taxable.
There are other items which can be provided tax free but they aren’t classed as gifts and we will cover these in a future blog. So go on – spread some cheer!