Business owners warned of Christmas gift tax

HMRC extend definition of ‘trivial’ gift tax this Christmas

Employers are advised to be aware of the tax implications of giving Christmas gifts to staff and customers this year.

While staff Christmas parties with costs of up to £150 per head are exempt from tax, HM Revenue and Customs (HMRC) generally perceives gifts to staff as taxable.

However, in addition to the staff party, gifts deemed as ‘trivial’ are exempt from tax as well. HMRC has recently extended the definition of what a ‘trivial gift’ is, and so business owners are advised to look into the guidelines and what constitutes over spending.

“A trivial gift can be more than you think,” said Kevin Nicholson, partner at PricewaterhouseCoopers LLP, “it includes individual items such as a turkey, a bottle of wine or a box of chocolates.”

However, he warned, “A case of wine or a hamper is not trivial and would be a taxable benefit. Giving both a turkey and a bottle of wine would potentially be outside the exemption. If in doubt, check with the HMRC.”

Gifts given to customers are tax deductible so long as they do not exceed £50 in value, and the VAT can be claimed back as well.

Nicholson added: “Businesses need to be careful with their gifts. The full cost – strictly including wrapping, bows, postage and packaging – has to be £50 or less to qualify for tax relief and all such presents have to be added together and still be under the limit.

“Otherwise the HMRC will override the £50 rule and the business might get a tax hangover in return for its generosity.”

© Crimson Business Ltd. 2007

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