The provision of staff events such as Christmas parties, which must be open to all staff, will not lead to a tax liability for the employee, or will it give rise to a National Insurance Class 1 liability for the employer, providing that the total cost of any such events does not amount to more than £150 per head for the tax year.
If you wish to give employees goods and other items such as hampers or vouchers, then the cash equivalent of the cost of such gifts must either be taxed through the payroll at the time of the gift, or disclosed on a form P11D at the end of the tax year, depending on the type of gift.
One way to avoid this charge is to apply by letter to your PAYE Inspector and ask for a PAYE Settlement Agreement (PSA) to be set up, detailing what items you would like to be covered. You cannot include large regular items such as sole-use company cars, car fuel, salary, bonuses or round sum expenses. As the employer, you would then be liable to pay the relevant tax and National Insurance liabilities on items covered by the agreement to HM Revenue & Customs, rather than passing the liability to the employees. The agreement must be accepted by the Inspector and needs to be renewed on an annual basis if required.
By Jo Nockels
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. 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 information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.