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Chancellor Announcement to Support Economy & Bringing Good End to Challenging Year Christmas Allowances

Chancellor Announcements to Support Businesses & Jobs -

17th Dec 2020.

The furlough scheme has been extended until the end of April 2021 with the government continuing to contribute 80% towards wages giving businesses and employees across the UK certainty into the New Year

Extending the government-guaranteed Covid-19 business loan schemes until the end of March 2021. Businesses struggling will have now until the end of March 2021 to access government generous loan schemes.

Chancellor also confirmed that the Budget will be on the 3 March 2021 and set out the next phase of the plan to tackle the virus and protect jobs

Bringing Good end to a Challenging Year & Looking

forward for Opportunities in New year 2021

Virtual party

The Covid pandemic of 2020 may present too many challenges for an actual party, so some other way could be found to reward employees.

Holding a virtual event via Zoom is probably an alternative many are considering this year. The main point to note is that in order to ensure the annual function exemption is available, some kind of register of attendance may be necessary.

Staff parties

Christmas is often the time for office parties and is a great way of making employees feel valued.

The party must be open to all employees and the cost to the employer must not exceed £150 per head (including VAT, taxis, and overnight accommodation), this being the total cost of the party divided by the total number of people attending (including non-employees).

If the cost per head goes over £150 (even by just a penny) then the whole amount is taxable – not just the excess over £150. This would then have to be reported on the employee’s P11D, or the employer could choose to pay the grossed-up tax under a PAYE Settlement Agreement (PSA)

Staff gifts

Rewarding staff with a festive treat may not be gratefully received if it comes with a tax tag. For example, a gift of cash would be taxable as earnings in the normal way.

HM Revenue & Customs (HMRC) does not tax seasonal gifts to staff, such as a turkey, an ‘ordinary’ bottle of wine, or a box of chocolates, so long as the cost is less than £50 ahead (a trivial benefit). Gifts worth more than this, such as an expensive hamper or a case of wine, may have to be reported on the employee’s P11D, or included in a PSA.

Client entertaining

Employers cannot claim a tax deduction for client entertaining. Where clients attend your Christmas party, the costs have to be apportioned between them and employees for tax purposes.

Business gifts to clients are not normally allowed as a deduction against profits – they are treated in the same way as business entertaining. There are exceptions:

. Gifts of free samples of your products are 100% deductible

. Gifts carrying a conspicuous advert for the business are tax-deductible (e.g. mugs, diaries, or pens), but only up to £50 per person per annum. (But gifts of food, drink, tobacco, and vouchers receive no tax deduction).

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