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Friday 9th December 2010 Christmas Tax Tips As we approach the season of goodwill, many business owners will be thinking about gifts for both their staff and/or customers. Here are the answers to many of the questions that might arise during the festive season; Can I reclaim the VAT on business entertaining? If you are entertaining employees, yes you can reclaim the VAT. If you are entertaining customers, no you cannot reclaim the VAT. You cannot reclaim the VAT when entertaining ex employees. If you take a mixed group of customers and employees on your Christmas do, you have to work out the VAT on the proportion of employees to reclaim.
What are the tax implications of buying gifts for customers? Gifts count as entertaining according to HMRC. If the value of the gifts bought per customer in any year are less than £50 cost, then you can reclaim the VAT. Similarly if you spend less than £50 on gifts, provided they are not food, drink or tobacco and they have a conspicuous advertisement for your business they are tax deductible. This means that you do not have to exclude this expenditure from your profit when your tax bill is calculated.
Can I buy my employees gifts? You can buy 'trivial' gifts for employees which are not cash or cash vouchers without any tax implications. The example HMRC give is a turkey and one or two bottles of ordinary wine. Provided your gifts are not lavish, then you should be ok. If you buy bigger gifts for the employees, you have to report these on form P11D and pay class 1 A National insurance. If your employees are paid less than £8,500 per year and are not directors, the gifts can be tax free in certain circumstances.
Please ensure you consult directly with either CCF or your own tax adviser before acting on any information given to ensure it suits your circumstances.
This information is based on current legislation which is subject to constant modification by the government. |
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