Forvis Mazars associate tax director Neelum Ali shares tips on how to throw a tax efficient Christmas, while still spreading the festive cheer
Practices will still be reeling from the recent Budget announcements, which will place further stress on practice finances from April next year. There will be a great deal of planning required to navigate the impact of these, but with staff working so hard throughout the year, it’s important they are recognised and rewarded in the festive period.
Below we illustrate ways to provide value to employees’ tax effectively, with some being fully exempt, to ensure you and your practice can have a tax efficient Christmas.
Christmas/annual parties
Christmas is a time to reflect on the year and enjoy a meal or party with colleagues. Employers can provide entertainment to staff, without tax consequences on them or the employee providing certain rules are met:
- The value is £150 or less per person
- It must be open to all employees
- It must be an annual event
Other annual entertainment, including summer parties or events must be considered in the value. If the value is over the limit, this will be reportable. If one event was £100 per head and the other £60 per head, the second would be reportable. If a single event was over £150 per head, that would be fully reportable. A common misconception is that it is the excess over £150 that’s reportable.
If partners of employees can attend, that adds to the overall value provided to a single employee.
Again, the cost of the event will be tax deductible for the partners.
Trivial benefits
Employees can be provided with goods or services up to the value of £50, without triggering tax consequences for them, or the employer. The cost of the £50 will be tax deductible for the employer, meaning for most GP practices, the net cost to partners will be under £30 per person.
A key point here is the amount provided cannot be in cash form or be exchangeable for cash. Store vouchers are the most common way to provide tax-free value to employees, but flowers, chocolates or hampers could be given instead. Also, the amount provided should not be in recognition of work done and instead a present or gift by the employer. These can be given at other points in the year and as long as it’s less than £50, can be given as many times as the employer likes (birthdays, marriages etc.)
This can give a welcome boost to employees, to top up Christmas earnings or help towards their own Christmas spending.
Vouchers or goods provided with a value of over £50 are not tax-exempt and will need to be reported as will any gifts that are within the terms of the employment contract.
Bonuses
Whilst bonuses will not be tax exempt for the employee, they will provide a welcome cash boost. The cost of the bonus, including employer’s national insurance will be tax deductible for the practice. Pension contributions should not be due if employees are full time, but care should be taken.
Care is also needed with employees who receive means tested benefits, as the extra income could result in loss of benefits.
Time off
Whilst the pressures on the NHS and general practices are at their highest in winter, additional time off at a later point may be welcome. Employees could be provided with an additional day or afternoon off for their birthday, or at another time of the year. It may be that the lost time can be covered by other staff, meaning there’s no additional cost to the employer. This is a great way to give back, making your team feel valued and recognised.
Appreciation
Whilst not every practice will be able to take on additional spending, a simple thank you to communicate appreciation of the hard work put in by teams over the year can go a long way. A personal thanks from the bosses can go a long way.
Neelum Ali is an associate tax director at Forvis Mazars
