Getting Your Christmas Spirit On – How Do You Expense It?
Hark! The Christmas radio sings, glory to the festive season! Ok, enough of that. There’s plenty of excitable singing going around as it is (at least there is in our office), without adding that in as well! But whether you like it or not, Christmas is just around the corner, and that means lots of festive planning, gift-giving and tinsel bring thrown up everywhere. The Christmas period is all about giving, and about showing people how much you appreciate them. And it’s not just limited to families and friends – many businesses get into the festive spirit too. It’s a great opportunity to promote your business, sending gifts and promotional offers, or just throwing a great Christmas party for your employees.
But while all of these are great things to do, you might also want to keep an eye on the purse strings (especially since most businesses slow down at this time of year). This means working out the most efficient way to put things through your business, what you can and can’t expense, and what you can claim back on.
That’s where we come in! There are generally three main areas for you to consider – Christmas gifts, Christmas parties and Christmas decorations.
Corporate Christmas gifts are an interesting one. You can buy them through the business without any problems at all, and they will likely go down a treat with your customers. But they generally won’t reduce the size of your corporation tax bill, and you won’t be able to claim the VAT back on them either. Unless of course, they fall into the category of:
- NOT being food, drink, tobacco or a voucher
- DO contain a conspicuous (clear) advert (so branded items)
- The total of all gifts to that person during the accounting period comes to less than £50
Which if you’re clever about it, leaves the door open to a lot of interesting gift options for you. You can also give away free samples of any items you provide as a product or service.
That’s for client gifts. But what if you want to give your employees a little something too? In this case, the rules are a bit different. In fact, gifts to employees can be claimed as long as the gift is entirely for the employee. But be careful because some gifts to employees are classed as a “benefit in kind”. This means the employee is taxed on the value of that gift. Basically, if the value is trivial e.g. a bottle of wine, then you aren’t required to report it to HMRC, but if it’s anything “substantial” or “cash-based” then it needs to be reported using a P11D form and the employee will pay tax on it. Sound complicated? Don’t worry, just give us a call and ask!
It’s not really Christmas without a staff party is it? Not only are they great fun, but they’re a great way to celebrate all the hard work your employees have put in over the year, and say thank you. For this kind of thing the business will usually foot the bill, and the good news is that it could come under tax-exempt spending – making the tax-man your Santa for the year.
If you want to qualify for the tax exemption, then you need to meet these criteria:
- The cost of your party has to come to less than £150 per head. This amount takes into account everyone who attends the event, including non-employees. If the cost goes to £151 per head, the exemption doesn’t apply.
- The event has to be held once a year, and not be a one-off event.
- It has to be open to every employee in your company. So directors-only dinners or social events for one department (for example) don’t count.
- If your company is VAT registered, then you can also reclaim the VAT paid on the event (for employee spend only), as it comes under the category of staff welfare.
Want an extra bonus tip? You can use this exemption for multiple events throughout the year, not just Christmas parties, as long as you don’t exceed the £150 per head limit. For example, if you throw a Christmas party that costs £10,000 and a summer party that costs £4,000 and 100 people attend each of them, then the cost would come to £140 per person, so both events would be exempt. But if your summer party costs £6,000 instead of £4,000, then the cost per head would be £160, and the exemption wouldn’t apply. It can take some maths to get your head around – but if you have a good bookkeeper (like us), we can keep track of all that for you.
Who doesn’t love decorating the office for Christmas? Personally, we love it! We’re an office full of ‘that person’ who decks everything you can see in tinsel and has singing Christmas trees on every desk. But maybe that’s just us. Either way, as long as it’s in a place of work (like an office) and NOT in your home, you can buy your Christmas tree and decorations on the business, and expense it back. If you want to send Christmas cards to your customers (a great marketing tip), you can also claim Christmas cards as an expense under the category of advertising, stationery and printing costs.
Do you have any questions? Please feel free to get in touch with the team here.
And so we are soon to say goodbye to 2019 – hasn’t it flown by! We can’t wait to see what the new year brings, both for us and for all of our wonderful customers. So for now, all that’s left to say is have a fantastic Christmas, a smashing New Year, and we will see you in the next decade!