Businesses across the Fylde coast are being urged to get into the Christmas spirit – but not forget about the tax liabilities involved.
The warning has come today from two prominent local accountants as the party season gets into full swing.
Both Red Dot Chartered Accountants and Montpelier Chartered Accountants say HMRC tax allowances on Christmas staff parties and gifts are worth exploiting.
Paul Wilcock of Montpelier said: “The cost of a Christmas party or other annual event is allowable as a tax deduction but only if certain conditions are met. If you do not meet these conditions a tax charge may be levied on both the employees and the business.
“HMRC allows a cost of up to £150 per head but you must also consider any other events which the business has provided during the year as the aggregate cost must not exceed £150.”
Peter Neill, director, at Blackpool-based Red Dot, said if the employer puts on a summer party and a Christmas dinner together costing less than £150 a head, both will be tax-free for employees, but one penny over this limit and the full amount spent will become liable to income tax and National Insurance (NI) for both staff and employer.
He added: “Businesses should make the most of the tax free amount and not just resort to putting up some cheap tinsel in the office and offering plates of pretzels and soft drinks.
“It has been a tough time for many businesses and staff are probably in need of having their spirits raised. Having a Christmas party is a real morale-booster and rewards the hard work that staff put in over the year.
“You can also provide a small gift to your employees. As an employer, you may provide team members with a seasonal gift, such as a bottle of wine or box of chocolates. These gifts are considered to be trivial and as such are not taxable.”
Mr Wilcock added: “A business gift to a customer would also be allowable as long as the cost does not exceed £50 per year. The gift must clearly promote the business and must not be one of food or drink.”