Can I claim tax relief on staff gifts and parties?

Making use of reliefs such as staff gifting and an annual hospitality event are a great way to say a seasonal thank you to your staff in a tax efficient way.

Tax relief on staff gifts

The first relief to consider is in relation to staff gifts. 

Special HMRC trivial benefits rules mean gifts which meet certain conditions are exempt from both income tax and NIC for employees and also employers.

The criteria for a gift to be treated as a trivial benefit are:

• The gift must not be cash or a cash voucher. Gift vouchers are allowed
• The total cost of the gift including VAT must not exceed £50 per employee
• The gift must not be provided under salary sacrifice or other arrangement
• The gift isn’t a reward for the staff members work or performance
• The gift must not be provided in connection with the employees contract – a Christmas gift would generally meet this requirement

HMRC advises that where the cost of the gift (including VAT) is more than £50, the full value of the gift will be taxable under the normal benefit in kind rules.

It is also important to note that tax avoidance rules prevent a director of a close company receiving more than a total of £300 of trivial benefits in any tax year.

Tax relief on staff parties

Providing an annual event, such as a Christmas party, is a great way to end the year and reward your team for all their effort.

Staff costs in relation to an annual event, which can be applied to a Christmas party, are allowable as a business expense.

However, if you exceed certain limits, you could create a taxable benefit for your staff members. It is therefore important to stay within the permitted limits when planning your annual event.

Provided you spend no more than £150 per person, no tax charge will apply to the staff member.

If you go over the £150 limit, the full amount becomes taxable on the staff member; not just the excess over the £150 limit.

To be exempt from tax and reporting obligations, your Christmas party or similar annual event must meet the following criteria:

• be open to all your employees
• be an annual event, such as a Christmas party or maybe a summer barbecue
• cost £150 or less per person

Where your business has several annual events, the combined cost of all the events and parties must be below the £150 per head limit to be exempt.

Date published 2 Nov 2022

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.