This past year has been tough for everyone, especially small businesses. You’ve survived temporary business closures, reduced customer foot flow, furloughed staff and faced uncertainty over the future of your business. So as we all slowly and cautiously begin to return to normal, now may be a good time to consider those employees who have really helped you and your business get through these tough times by saying ‘thank you’.

One way of doing so could be by giving your employees a gift, but what is allowable when it comes to tax? In this blog we explore just that.

Can you give gifts without tax consequences?

Yes, you are able to purchase one-off gifts for your employees without incurring any further tax or National Insurance consequences, so long as it meets a trivial benefit.

If a trivial benefit is given to employees it’ll be exempt from tax as employment income, so long as the following conditions are met:

• The benefit’s cost does not exceed £50
• The benefit is not in the form of cash or a voucher
• The benefit is not part of any contractual obligation
• The benefit is not given to the employee in recognition of their services completed as part of their employment duties, or in anticipation of such services

Regardless of whether the employer is a director or an employee, the amount you can gift to any one individual is capped at a total of £300 per year.

If you accidentally go over the limit or fail to meet any of the above conditions, the employee will be taxed via a P11D form and the employer will also be liable for to Class 1A National Insurance. The employer is able to cover these costs in a Pay As You Earn Settlement Agreement (PSA), which means the employer agrees to settle the liability themselves.

The other types of trivial benefits which are allowed include:

• Treating your employees to a meal out to celebrate an event, such as a birthday
• Purchasing Christmas presents for each of your employees
• Giving flowers when an employee has a new baby
• A summer party that every employee is invited to

If the benefit exceeds the £50 limit then the whole amount is taxable, and not just the amount over £50.

There are types of benefits which aren’t allowable. These include:

• Paying for a working lunch (as this is considered part of an employees contract)
• Giving gifts, paying for events or incentives that are related to an employee’s performance
• Giving gifts, paying for events or incentives in relation to employment services (ie team building events)
• Transportation costs when an employee has to work late

How Vantage Accounting can help

We help small businesses navigate the complex and confusing world of tax and accounting every day. From ensuring you’re paying the right amount of tax (but not a penny more!) and making full use of the tax allowances available, we’re here to help guide you keep as much of your small business income as possible, whilst keeping the taxman happy.

And if you can keep your staff happy in the process also, then why not!

Get in touch today to find out more about our services and how we can help you.