Whether you’re working between Christmas and New Year or you’ve abandoned it for the festive season, eventually it will be time to balance the books. Can you claim for that round of drinks on Christmas Eve and the glittery cards you sent out?
Put the crisps aside for a minute and read on to find out. Just in case you discover the other 30 bags are best kept for next year.
Oh Christmas Tree, Oh Christmas Tree, can I claim for you?
Yes, you can claim for Christmas trees and decorations if they’re used to embellish your work premises. If you work from home, forget it. It won’t wash.
With every Christmas card I write
Cards that say ‘Merry Christmas from Jim Samsom, Reindeer Enterprises’, are a nice gesture but not obviously promoting your business. Unless that is your business, of course.
To ensure Christmas cards are truly tax deductible, add promotional material or information on a New Year sale. That way, it’s an advertising cost.
Is my staff Christmas party tax deductible?
To be fully tax deductible, your staff party must be annual, open to all staff, and cost less than £150 per head. Anything over that becomes a taxable benefit for the staff.
However, entertaining clients and subcontractors is not tax deductible. Because this is business entertaining it won’t reduce your corporation tax or income tax.
Christmas gifting and your tax bill
You can’t claim tax against gifts to clients unless:
it costs less than £50, and;
the gift itself features a prominent logo or advert for your business, such as calendars, diaries, pens, mugs etc.
Also, consumables such as food and drink aren’t tax deductible due to their temporary nature.
You can give what HMRC terms ‘trivial’ gifts to staff, such as food, chocolates or wine. These are allowable costs for the purposes of calculating taxable profits and aren’t a benefit in kind for the recipient.
HMRC’s examples of a trivial gift are ‘a turkey, an ordinary bottle of wine or a box of chocolates.’ You’ll need to report larger gifts to staff, and might need to pay National Insurance on them.
How does tax work for my employee’s Christmas bonus?
There are indeed regulations to remember regarding Christmas bonuses:
Any Christmas bonus you give to employees still counts as income. This means that it needs to go through your payroll with their other earnings, where it’s subject to tax and National Insurance as usual.
You don’t need to report the gift (or pay NI or tax) if you give goods that can’t be resold for cash to employees who earn less than £8,500 a year.
You will need to complete a P11D (and pay NI) for gifts to employees earning less than £8,500 a year, unless they’re trivial benefits. Complete a P9D if they’re goods with a cash resale value.
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About The Author
I'm an experienced and fully AAT and ACCA qualified accountant, who is enthusiastic about helping business owners succeed. I also love cooking and needlepoint (at different times!). Learn more about Beth.