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Christmas is a wonderful time for the family and it’s also the perfect point to say a hearty “well done” to your staff with a great party or some thoughtful gifts, especially after the kind of year we’ve had!

But you need to be careful because the taxman is watching and if you don’t plan your gift-giving then you could end up with an additional tax liability.

So what are you allowed (and not allowed) to do? In this post we’re looking at;

What are trivial benefits?

How many trivial benefits can you have in a year?

Do I or my employees need to pay BiKs on trivial benefits?

Do I need to report trivial benefits?

What party expenses can I claim?

How much can I spend on my firm’s Christmas party?

Can I claim for partners at a Christmas party?

Can I claim a virtual party as a business expense?

Can I claim for a Christmas party at more than one location?

Can I claim for more than one party in a year?

A trivial benefit is a form of small, one-off gift that you may give to your directors and employees throughout the year.

In the past, these would often need reporting to HMRC for tax and National Insurance purposes, but the new trivial benefit exemption means that as long as you comply with the rules, then this is not necessary.

What are the trivial benefit rules?

There are four main rules for trivial benefits and these are;

There is a further rule for directors of close (controlled by 5 shareholders or less) companies in that the directors can’t be given more than £300 worth of trivial benefits in a tax year.

Examples of trivial benefits

We can’t hope to think of all the different gifts a business might give their employees during the year. We’ve searched our memory banks and come up with some of the things that people have been presented with in the past.

So you can see that the list of things that you can give is really only limited by your own imagination. Remember though that all of these must conform to the rules above, otherwise there will be tax and National Insurance to pay!

No. As long as they comply with all of the rules then there is no tax or NIC to pay by either employee or employer.

Learn more about Benefits in Kind and tax.

As long as the benefits comply with the rules above then there is no limit for employees. For directors, the aggregate amount in one tax year is £300, so this could equate to six gifts of £50, for example.

Are there any limits or caps on claims for trivial benefits?

Yes. The limit is £50. If you go over this amount then the whole benefit is taxable. You could potentially split it down into separate individual gifts but they would have to be clearly distinguishable.

And please remember that if HMRC suspects that you are gaming the system then they have powers to disallow these, so play fair!

Not as long as they comply with the rules. One of the great things about trivial benefits is that it’s an initiative by HMRC which genuinely makes life easier for employers.

Now although they have a reputation as penny-pinchers, HMRC isn’t totally devoid of good cheer at Christmas. To this end they allow limited companies (but not sole traders) to put on a do and claim it against tax.

But as you would expect, there are some rules to abide by. The first thing to say is that this is an exemption and not an allowance – the distinction is important.

If you go over the exempt amount, even by £1, then the whole amount is taxable.

The three key rules to remember

As long as you comply with these rules then you are good to go.

You can spend up to £150 per head on all of your annual events during the year. If you spend £151 then you’ll be taxed on the whole amount.

So, you could choose to have an epic bash once a year and spend the whole amount, or you may decide to have a good Christmas do for £100 and then a smaller summer picnic for £50.

Naturally, some costs will be easy to work out. You may have booked to have a meal at a location that charges £60 per head for example.

Others won’t be so clear, such as booking a DJ or table magicians, so you need to add up the cost of the whole event and then divide it by the number of people attending.

Whilst we are on the subject of attendees, you also have an exemption for a plus one. As long as they are a family member or partner then you can claim another £150 which means that you can upgrade your DJ to David Guetta!

accounting services for limited companies

Yes. A virtual party is still claimable as long as it complies with the rules. We know that a lot of companies are working almost totally remotely post-pandemic, so they have been sending out the food and alcohol, and all logging in for a totally virtual party.

Yes. If you have a company that has more than one location then you can hold separate events. By the same token, if you have different departments then they can each have their own party but every employee must have the chance to attend at least one of the parties. The total spend for each person can’t go over that £150 mark.

Yes absolutely. Spend £25 on a spring bash, £25 on a summer picnic, £25 on a Halloween booze-up and then splurge £75 on a great Christmas disco. You can split it any way you want, as long as you follow the rules, and don’t pass the £150 limit.

Get the lowdown on your Christmas party and trivial gifts

As we mentioned earlier, we couldn’t possibly cover every eventuality for every company as the types of events and gifts they want to give is really only limited by their imagination.

So if you have something a little out of the ordinary then why not pass it by us and make sure it won’t land you with a tax bill? Call us now and let us help you with your annual event. Call 020 3355 4047, or grab an instant quote online.

About The Author

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible. Learn more about Elizabeth.

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