By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants. The Money Matters column appears in the Pembrokeshire Herald, the Carmarthenshire Herald and the Llanelli Herald newspapers.By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.
It’s Christmas and some employers may wish to give a small gift to their employees.
As long as the employer meets the relevant conditions, no tax charge will arise on the employee.
A tax exemption is available, which should help employers ensure that the benefits provided are exempt and do not result in a reportable employee benefit in kind. If you have any doubts, then please feel free to contact the team at chartered accountants Clay Shaw Butler.
In order for the benefit to be exempt it must satisfy the following conditions:
- the cost of providing the benefit does not exceed £50 per employee (or on average when gifts made to multiple employees)
- the benefit is not cash or a cash voucher
- the employee is not entitled to the benefit as part of a contractual arrangement (including salary sacrifice)
- 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.
One of the main conditions is that the cost of the benefit does not exceed £50.
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. Some HMRC examples consider gifts of turkeys, a bottle of wine or alternatively a gift voucher.
Further details on how the exemption will work, including family member situations, are contained in the HMRC manual.
However, if you are unsure please do get in touch with the team at Clay Shaw Butler before assuming the gift you are about to provide is covered by the exemption.
For more advice online, go to the HMRC manual link on the Government’s website – https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21864
You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) – http://www.clayshawbutler.com/news/latest-news-for-business
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