Expenses and Benefits: Tax-free Gifts to Staff

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In an environment where most employee ‘perks’ is subject to tax, it may be helpful for you as an employer to be aware of the few concessions that have been made by HMRC.

However, these concessions may not apply if the arrangement is linked with the employee giving up an amount of salary to receive the benefit (known as salary sacrifice).

What expenses can I claim on gifts to staff?

There are circumstances in which HMRC will allow you to claim the cost of gifts to your employees. Some of these instances include:

Long service awards

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.

Suggestion scheme awards

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 a meritorious effort on the part of the employee concerned.

Staff parties

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).

For further details of other non-taxable benefits see our expenses section.

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Trivial benefits

Under certain circumstances, HMRC will allow directors to provide their employees with certain gifts with no obligation to include costs in end of year reporting, as long as certain conditions are met. This is known as trivial benefits.

What counts as a trivial benefit?

Trivial gifts are exempt from tax up to a vale of £50 per gift. This would apply to gifts such as Christmas gifts, or gifts on the arrival of a child or other personal event.

It is also possible to use the exemption to provide flu vaccinations for staff and similar arrangements provided the benefit is not a voucher exchangeable for cash or a reward for doing their job.

A cash benefit, or a cash voucher, however, is always taxable irrespective of the value.

Owner managers are further subject to an annual cap of £300 on gifts to themselves or employees who are members of their family.

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