Category Archives: Employment taxes

Festive gifts and Xmas parties

Some employers may wish to give their employees a small gift or throw a staff party at this festive time of year.  But what are the tax implications?

Small gifts to employees

Gifts can be classed as ‘trivial benefits’ and therefore exempt from tax as long as HMRC guidelines are adhered to:

  • the cost of providing the benefit must not exceed £50 per employee
  • the benefit must not be in cash form (including cash vouchers)
  • the benefit must not be a reward for work or performance
  • the employee must not be contractually entitled to the benefit
  • the benefit must not be part of a salary sacrifice arrangement

One of the main conditions of tax exemption is that the cost of providing the gift or benefit must not exceed £50, including VAT.   On occasions where an employer provides a benefit to a group of employees and the precise cost per person cannot be established, the average cost per employee can be used.

Where the gift consists of more than one item, e.g. a bottle of wine and a box of chocolates, then the total cost of the gifts is the cost of providing the benefit.

It should be noted that if the cost of the benefit exceeds £50 then the full cost becomes taxable, not just the amount exceeding £50.

The rules are different 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.  In this case, the exemption is capped at a total cost of £300 in a tax year.

Xmas parties

HMRC guidelines for providing tax exempt parties / social functions for employees are basically that:

  • the cost of the event must not exceed £150 per head
  • the party / social function must be an annual event
  • the party / social function must be open to all employees

Multiple annual parties / social events can be tax exempt as long as the combined cost of the events does not exceed the £150 per head limit.

If you’d like further information or advice on this, then please do contact us or refer to HMRC’s detailed guidance.


Trivial Benefits

From 6 April 2015 there will be a statutory exemption for certain non-cash benefits in kind costing up to £50.

Currently, there is no minimum cost threshold below which benefits are disregarded for tax purposes, but from 6 April employers who provides certain low value benefits-in-kind to their employees will, in some circumstances, become exempt from income tax.  This will remove the need for annual reporting of such benefits via P11Ds or PAYE settlement agreements (PSAs).
A trivial benefit will be exempt from income tax, provided that:

  • the benefit is not cash or cash vouchers per s75 ITEPA 2003
  • the cost of providing the benefit, or its average cost per person does not exceed £50
  • the benefit is not provided pursuant to a salary sacrifice scheme or any other contractual obligation
  • the benefit is not provided in recognition of the employee’s service.

The following are examples of items that may be regarded as trivial benefits:

  • a gift of flowers on birthdays, anniversaries or special events.
  • workplace drinks eg. tea, coffee available to all employees.
  • a Christmas turkey.
  • a bottle of ‘ordinary’ wine.
  • a box of chocolates.

Input VAT is reclaimable by the employer on the cost of trivial benefits made to staff.

An annual cap of £300 will be introduced for office holders of close companies and employees who are family members of those office holders. Those affected by this cap will be able to receive a maximum of £300 worth of trivial benefits in kind each year exempt from tax.

If you would like further clarification or advice on this subject, please do get in touch.