There are various tax implications to consider on gifts and parties that you may be providing to your employees at this time of year. The most common situations that arise are as follows:
Cash Gifts or Bonuses
These are treated as normal pay and subject to PAYE and Class 1 NIC in the normal way. The important point here is that this also applies to vouchers that can be exchanged for cash.
Gifts to Employees
Gifts that can be considered as 'trivial benefits' such as a turkey, ordinary bottle of wine of a box of chocolates will not need to be declared on P11D. There is no set monetary limit below which benefits are deemed to be trivial however in the region of £20 is generally considered to be trivial. Any gifts of a higher value (and classed as non trivial such as cases of wine/hampers will be subject to tax and NIC and declared on P11D as a benefit or included in a PAYE Settlement Agreement (PSA) and the employer pays the tax and NIC.
If declared on P11D the employee will pay the through the tax code and the employer will pay Class 1A NIC. A PSA is a voluntary arrangement made by the employer with HMRC to account for tax and NIC on minor, irregular or impractical items. If a PSA is arranged then the employer effectively pays the tax due and relieves the employee of any tax liability on the gift. Although there is the extra cost of the tax and NIC a PSA cuts down on paperwork and record keeping and if there is a large number of employees P11D's will not be required in this respect.
Money's worth benefits such as Store gift vouchers (exchangeable for goods) cannot be treated as trivial benefits. They will be appropriate for a PSA however.
Christmas Parties (and Summer Events)
Tax and NIC is not normally due on any 'annual' function if the cost is less than £150 per head (including employees partners). The cost per head is the total cost of the function, accommodation, food drink and travel, divided by the the total number of attendees. If the cost per head exceed £150, then the whole amount would be subject to tax and NIC and should be declared on P11D. For example if the total cost per head is £175 per head the employer is taxed on £350 as the cost for the partner is also included on the employees P11D
