Giving Employees Tax Free Gifts This Xmas
As an employer you may wish to give your employees a gift as a thank you for their hard work but you don’t want them to be tax on the gift. As long as you meets the conditions, then your employee won’t be taxed for your generosity.
The tax exemption that is available will help employers ensure that the gifts provided are exempt and do not result in a reportable employee benefit in kind. Below are the key considerations you need to take into account.
No more than £50!! This is the key consideration!
The cost of the benefit does not exceed £50 on average per employee. If the cost is above £50 the full amount is taxable, not just the excess over £50. The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. HMRC examples consider various gifts including turkeys, bottles of wine and gift vouchers.
Other things to remember….
The benefit must not be cash or a cash voucher
The employee is not entitled to the benefit as part of a contractual arrangement
The benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
Where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.
If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.