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We all love a bonus at Christmas but as an employer, what are the implications of giving a well-intentioned gift?
Almost all Christmas bonuses or gifts paid in cash to employees are invariably taxable as earning. It will mean any gift you give will be worth less than you as the giver or your employee, as the recipient may expect.
As an employer, it may be worth considering a giving a gift rather than extra cash. However, it is still important to confirm that the trivial benefits in kind (BiK) rules apply or not.
The tax expectation applies to trivial BiKs where the BiK:
- Is not cash or a cash voucher: and
- Costs £50 or less: andis not provided as part of a salary sacrifice or other contractual arrangement; and
- is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.
So, should you give your employees a bottle of wind or a Christmas hamper, it does not matter if they cosy £15 or £49, they will still qualify as the value is £50 or less. You could also give your employees a gift voucher, as long as it is not a cash-voucher, as long as the value is £50 or less.
It is important to remember that that the gifts you give must not be provided in recognition for your colleagues service but must be a gesture of goodwill at Christmas.
There is an annual cap of £300 for directors or other officeholders of close companies and to members of their families or households. The £300 cap does not apply to normal employees.
There is no longer a requirement for employers to report these benefits on P11Ds or PAYE Settlement Agreements. However, if the Christmas gifts have a value of over £50 or cannot be counted as a trivial benefit, then the gift must be reported on form P11D and employer Class 1A NICs will be payable.
If you are not sure what you should offer your employees as a bonus and would like a check, call or contact our team at AccountAbility-Plus on 01440 821991 and we are happy to have a quick chat.