Just a reminder of the tax implications of Christmas parties and gifts - the implications for employees and employers can be found on our earlier news article tax on Christmas gifts and parties. 

Expenditure on business entertaining and gifts is not generally an allowable expense against profits for tax relief in a business. However, an employer can obtain tax relief on a staff entertainment event such as a Christmas party or sporting event so long as the entertaining is wholly and exclusively for the purposes of the trade and is not merely incidental to entertainment which is provided for customers or others who are not employees. ‘Employees’ is extended to include retired members of staff and the partners of existing and past employees. 

Whether or not the entertaining is incidental will depend on the nature of the occasion. If the employer would not have paid for the entertaining had the guest not been present, then the event is business entertainment and the entertainment of the employee is incidental to this. The total cost of the guest and the employee would not be allowed as a deduction against profits. 

Gifts tend to follow the same rules as business entertaining and are not allowable as a deduction against profits. One exception to this is small gifts carrying a conspicuous advertisement and which fulfil the following conditions:

• The gift is not food, drink or tobacco, nor is it a token or voucher exchangeable for goods.
• The cost of the gift (together with the cost of any other such gifts to the same recipient in the relevant tax period) does not exceed £50.

Examples of allowable gifts are diaries, pens and mouse mats with the advertisement on the gift itself, and not just on the wrapping.

The above is a summary of some of the rules on gifts and business entertainment. If you would like more information then please  contact us.