Over the Christmas period, you may wish to treat your employees. This is a tried and trusted approach to building a strong relationship with your team.
But are you aware that you may be breaking PAYE rules by doing so?
We want to ensure that you enjoy the holidays just as much as your team, so we’ve put together our top tips to ensure that you stay on the right side of the taxman this Christmas.
Getting gifts right
Trivial benefits are items of value given to an employee that do not count towards taxable income or National Insurance Contributions (NICs).
To qualify, the gift must meet ALL of the following conditions:
- The gift isn’t in the terms of the employee’s contract
- It is below the value of £50
- It isn’t a performance-linked reward
- It isn’t cash or a cash voucher
A trivial benefit in kind could include a Christmas lunch, a small Christmas present, or a gift on the day of an employee’s wedding.
If the gift does not meet all of the above criteria, it must be reported as a benefit in kind to HM Revenue & Customs (HMRC) and tax must be paid as appropriate.
What about incidental expenses?
Incidental expenses, as described by HMRC, are expenses “incurred by an employee while travelling overnight on business”. These may include purchasing newspapers, paying for laundry or using the hotel telephone.
As long as the value of the expenses does not exceed more than £5 per night for travel within the UK and £10 per night for travel outside the UK, they do not have to be reported to HMRC.
For more information on tax exemption for benefits in kind, click here