Many businesses across Shropshire are giving valued clients gifts and hosting Christmas parties to reward employees and thank good suppliers. However, a leading accountancy firm in Shrewsbury is warning small and medium sized enterprises to be aware of the tax and VAT implications.
TaxAssist Accountants has produced guidance notes to help local businesses decipher what is, and isn’t acceptable to HMRC, as well as publishing them on their blog at www.taxassistshrewsbury.wordpress.com.
“Although HMRC allows companies up to £150 per employee for an annual party, this must be open to all employees,” explained Nigel Lomax, Owner and Director of TaxAssist Shrewsbury. “Companies must be very careful though, because if the party exceeds this threshold then the full amount of the benefit will be chargeable.”
The cost of the function must include all elements, from transport and overnight accommodation, to food and drink, and should also be inclusive of all VAT. “If non-employees attend the party, so spouses or guests, companies can include them in the expenditure calculation, but they will still fall within the £150 per head threshold,” added Nigel. “To make it a little more complicated though, you will only be able to claim VAT back on the bill for your staff members and not for partners or guests, so make sure to show the split between employees and non-employees.
“This allowance is good news for SMEs and owner-managed businesses, as even if only two or three members of staff attend, you can still claim up to £150 per head based on your expenditure.”
When it comes to Christmas gifts, these are taxable for employees unless they are deemed ‘trivial’, such as seasonal items like a turkey, ordinary bottle of wine or a box of chocolates. Items outside this need to be included in a form P11D, and monetary gifts such as bonuses are taxed alongside payroll in the normal way.
“Gifts to clients and customers are usually treated as entertainment but those up to £50 which contain conspicuous advertising for your company can be an allowable expense. But do be careful, because if the gift costs more than £50 when you include gift wrap, the whole amount will be disallowed,” warned Nigel.
“With some planning, however, there’s no reason why Shrewsbury busiensses shouldn’t be able to spread some festive cheer without losing any tax benefits, so Christmas really doesn’t need to be taxing!” concluded Nigel.
For further information, or to find out how TaxAssist Accountants Shrewsbury can help small businesses beat the recession, please contact a member of the team on 01743 366669 or visit www.taxassist.co.uk/shrewsbury.
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