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However, HMRC is aware that this may cause problems for staff who make Universal Credit claims, as reporting the payday as the payment date can impact on benefit entitlements.

HMRC advises that if you do pay your staff early over the Christmas period, you should report the normal (or contractual) payday as the payment date on the Full Payment Submission (FPS) and ensure the FPS is submitted on or before this date.

For example, HMRC advise that if you pay on Friday, 17th December 2021 but the normal (or contractual) payment date is Friday, 31st December 2021, you should report the payment date on the FPS as 31st December and ensure the submission is sent on or before 31st December 2021.

The overriding PAYE reporting obligation for employers is unaffected by this easement and it remains that you must report payments on or before the date the employee is paid, that is payday.

If you are not aware of the Christmas Easement rules, you still time to plan ahead if you plan on paying your staff early for Christmas.

At TaxAssist Accountants we can oversee your payroll processes, costs, calculations and deadlines to take care of everything for your business. We only use HMRC and RTI compliant payroll software that helps firms fulfil their payroll duties without unnecessary limitations or pointless restrictions.

Tax on staff Christmas gifts

With Christmas just around the corner, now is a great time to take a look at what tax-advantaged Christmas gifts HMRC will allow you to provide your staff. 

Under the trivial benefits rules, gifts meeting certain criteria are exempt from income tax and NIC for employees and 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 their work or performance
  • The gift must not be provided in connection with the employees contract – a Christmas gift would generally meet this requirement

If the cost of the gift (including VAT) exceeds £50, the full value will be taxable under the normal benefit in kind rules.

There are rules in place to prevent abuse and a director of a close company can only receive a total of £300 of trivial benefits in any tax year.

These rules provide welcome for tax relief for employees and employers on occasions such as Christmas and allow a tax efficient thank you at the business year end.

The rules could also potentially cover a Christmas meal or party costing under £50 a head, where the annual staff functions cost limit of £150 has been used on another event in the year. 

From all of us at TaxAssist, we’d like to wish you and your staff a Merry Christmas and a Happy New Year. 

If you want to discuss the provision of tax efficient gifts and annual events for your staff, please get in touch today on 0800 0523 555 or use our simple online contact form and we can help you explore the different ways you can reward your staff.

Date published 9 Dec 2021 | Last updated 10 Dec 2021

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.

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