· HMRC have an Exemption (not an allowance) of £150.
- available to employees generally or
- available to employees generally at one location, where the employer has more than one location.
· If the employer provides two or more annual parties or functions, no charge arises in respect of the party, or parties, for which cost(s) per head do not exceed £150 in aggregate.
The figure of £150 is not an allowance. For functions that are outside the scope of the exemption (see example at EIM21691) directors and employees, except those in an excluded employment, are chargeable on the full cost per head, not just the excess over £150, in respect of:
- themselves and
- any members of their family and household who attend as guests.
The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.
Christmas Gifts from suppliers to employees
Certain gifts from third parties are tax free if all these conditions are satisfied:
• the gift consists of goods or a voucher or token only capable of being used to obtain goods, and
• the person making the gift is not your employer or a person connected with your employer, and
• the gift is not made either in recognition of the performance of particular services in the course of your employment or in anticipation of particular
services which are to be performed, and
• the gift has not been directly or indirectly procured by your employer or by a person connected with your employer, and
• the gift cost the donor £250 or less, and
• the total cost of all gifts made by the same donor to you, or to members of your family or household, during the tax year is £250 or less.
Some other gifts are not taxable. If you earn at a rate of less than £8,500 a year and you are not a director, a gift to mark a personal occasion, such as
a wedding present, which is not a reward of your employment, is not taxable. If you earn at a rate of £8,500 a year or more, or you are a director,
any gift from your employer is taxable unless your employer is an individual and makes the gift in the course of family, domestic or personal relationships.
Seasonal gifts from Employer to Employee
An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts can be treated as trivial benefits. . For an employer with a large number of employees the total cost of providing a gift to each employee may be considerable, but where the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned. If a benefit is trivial it should not be included in a PSA (EIM21861).
If the gift extends beyond one of the items mentioned above, for example from a bottle or two to a case of wine, or from a turkey to a Christmas hamper, you will need to consider the contents and cost before being able to determine whether the benefit is trivial.
PAYE Settlement Agreement (PSA)
For practical purposes it may be that small cash and money’s worth benefits can be included in a PSA.
PAYE Settlement Agreements (PSA’s) are requested by Employers and subject to agreement with HMRC. Under this agreement the employer will be responsible for accounting for any tax and national insurance liabilities arising. Any items covered by a PSA will not need to be shown on forms P35 and P11D at the end of the tax year.