Here’s the deal:
If you own a company, or employ staff you can give gifts of up to £50 per employee totally tax free under HMRC’s Trivial Benefits Exemptions!
If you are a director of the company, you count as an employee and therefore you can award yourself a gift!
This can be practically anything including
- Christmas turkeys
- Bottles of wine
- Computer games
- Meals out
- Event tickets (for instance sporting, music, theatre etc)
- Birthday presents
- Christmas presents
- Wedding presents
…you get the point!
What’s more the £50 limit can be repeated – so you can award yourself another gift, so long as each individual gift is up to a maximum of £50. You can keep doing this up to the total limit of £300 per year (tax year – 5th April) per business.
Hang on – per business? So if I’m a director of multiple companies I can do this over and over? £300 per company??
Yep – absolutely true!
We’re not sure how long HMRC are going to leave this loop hold open – it’s an extraordinary and uncharacteristic show of generosity by the treasury, and we think it will disappear before too long. Be sure to take advantage of it before it’s too late. It was brought in in the April 2016 budget, when George Osbourne was still Chancellor – the new Chancellor, Philip Hammond, in the Autumn statement in 2016 showed a particularly brutal approach to company benefits via salary sacrifice – this may be the start of things to come.
There are certain conditions that need to be met but here are the main ones:
- Each individual benefit does not cost more than £50 per
- Its not cash or a voucher
- There is no contractual obligation – its got to be a genuine gift.
- It cannot be performance related – this is not a bonus – it’s a gift!
There are some other restrictions and of course you need to ensure that other legal issues are not present (for example issues with the bribery act)
Who can get the Gift?
Well the company can award the directors – which in many cases mean that you award yourself a gift – how very generous of you!
You can reward your employees
You could also reward your family. If they don’t work for the business in their own right, the gift will be treated as if it were yours.
What to watch out for?
If you go over the £50 limit, you get taxed on the whole amount, not the excess.
So you award yourself a £60 bottle of wine – guess what? You are on the hook for the full £60 as a benefit (so you pay income tax on the £60)
Anything else you need to know?
- The good news is that any payments you make for gifts are deductible for corporation tax.
- If you are unincorporated, you are unlikely to be able to personally take advantage of this, as individuals are taxed differently to companies. You could still give the gifts to staff
- How to I work out the cost – well its whatever it cost the business – not the market value – so if you get bulk discount – great! (Its worth pointing out that what are known as the marginal cost rules can apply – these are the rules that allow airlines to offer staff flights for almost free as the additional cost of taking another passenger is virtually nil – could these rules apply to you?)
- As there is no Benefit in Kind, there is also no class 1a national insurance tax to pay be the company
- The cost of the benefit is usually the VAT inclusive value. Its worth pointing out that the VAT implications of this can get quite complicated. There are situations that you can claim some of the VAT back. Its best to assume that you can’t claim it back
- It’s worth running any plans by your accountant, just to make sure you are not falling foul of any rules.
So to summarise:
You can provide gifts of
- Up to £50 per gift
- Up to a total of £300 per business per year
- Gifts can be repeated to the same person and each business can has a limit of £300 – if you’re a director of multiple companies, you can do this multiple times
- As a director you can award this to yourself or to staff