All the major retailers have rolled out their festive TV ads, people are bustling about with carrier bags full of presents and rolls of wrapping paper, so that means we are officially allowed to say the “C” word, yes, “CHRISTMAS”!!!!
As a business owner, you may well be thinking about how to give something back to your workforce at this time of the year, of course, there’s the obligatory Office Party, but what else can you do to say “Thank You”?
Offering a bonus (whether it’s cash or perhaps a gift card) is a no-no as the good people at HMRC will add the necessary taxes to this, but there is a bit of a loophole in the system which allows you to spread some goodwill and it’s tax deductible.
The “trivial benefits exemption” means that as director of a limited company, you can purchase multiple gifts costing less than £50 each, up to a maximum of £300 in any one year. For example with all the great supermarket deals available on wine, champagne and Prosecco, you could buy 12 x £25 bottles of Taittinger (other brands are available) to do with what you wish:
- You could distribute them to employees, but not as a reward! It must not be for fulfilling an obligation or performance related, perhaps it could be for having the nicest tie in the office 😉
- Keep them for yourself, again not as a reward but just because there isn’t a “y” in the month (you’re getting the idea here aren’t you).
- Give them to a member of your household, for instance your Spouse, but if they are also a Company Director, whether the same company or not, they too benefit from the same loophole and remember this does not just relate to alcohol – as long as the item is under £50 it is fair game, so why not treat your stay at home children to something they would appreciate.
If you are Director of more than one limited company, it is perfectly acceptable to carry out this process for each entity, just remember to follow the rules and as we have mentioned, this benefit can be used to purchase whatever you choose as long as the criteria are met, so to recap, here are the rules.
- The benefit must not exceed £50
- It must not be cash or a cash voucher
- The benefit must not be a contractual obligation or in recognition of a service performed – so do not buy yourself wine for doing a good job but buy it because the sun is shining (or some other ridiculous reason not connected to performance)
- The total benefits are capped at £300 per year
- All Directors can benefit
- As a Director of a limited company you can benefit from each entity
As with anything tax related, we know that these can be tricky matters to handle, so if you unsure how to deal with them give us a call on 01737 570127.
