Ebenezer Scrooge. Now there was a feller who understood how costly Christmas can be. You can be sure that he’d have had a pretty good idea too about which expenses he’d be able to claim on with HMRC. In our final blog of the decade, we have some seasonal words of wisdom on how to be smart with your small business costs and expenses. Here are four claimable Christmas expenses that you won’t want to miss out on. Each will help you to reduce the amount of profit on which you pay tax –
1. Decking the halls
Does your business have an office that isn’t part of your home? If the answer is yes, then you can actually claim tax relief on tinsel! You can log your Christmas decorations, as well as a tree, as day-to-day running costs.
If you work from home – sorry! You won’t be able to claim. These decorations are for your personal enjoyment rather than for business purposes.
2. Stocking fillers
Looking to cement your status on your clients’ ‘nice list’ with a festive gift? If you decide to give a present to a client, you can record it as a business cost in your accounts and potentially save some money on your tax bill. All you need to do is to meet the following stipulations –
- You can’t spend more than £50 per year on gifts for any one client.
- The gift can’t be food, drink, tobacco or a voucher that the client can exchange for goods or cash.
- The gift must contain a clear advert or promotion for your business.
3. Your office party
Christmas parties can be a great way to show how much you appreciate your employees and clients. However, before you claim the cost as an allowable expense, check who’s on your guest list!
Christmas parties for employees
In some cases, you can throw a staff party without incurring any extra tax for you or your employees. This can often depend on whether or not you need to report the cost of the party as a taxable benefit for your employees. Talk to us – 01604 700020 – to find out for sure.
Christmas parties for customers or clients
Are you giving a Christmas party for anyone other than your staff? If so, HMRC will consider this to be business entertaining. Not claimable, I’m afraid.
4. Christmas gifts
If you have employees, you may want to give them a Christmas gift or even a bonus to thank them for all of their hard work throughout the year. Here are some key tax considerations to think about –
If the gift doesn’t have a direct cash value then HMRC might accept it as a ‘trivial benefit’. This is defined as a small gift that’s given for personal reasons, rather than reasons relating to employment. Here’s an example – a comedy Christmas jumper could be ‘trivial’ but a long service award would relate to employment and definitely not ‘trivial’.
If you do give a ‘trivial benefit’, you won’t have to report it on the employee’s P11D form and you won’t need to pay any extra tax or National Insurance. If the gift has a cash value (e.g. a gift voucher), you might need to report this value either as part of your employee’s earnings or on their form P11D. HMRC has issued some official guidance on this here. Or, just pick up the phone – 01604 700020 – and we’ll help you out.
Are you paying your staff a Christmas bonus? HMRC treats this no differently from regular earnings. So, just put it through your payroll as normal.
Here to help
So, to conclude – don’t get your tinsel in a tangle. If you’re unsure about which Christmas expenses you can and can’t claim against, then give us a call. After all, it’s why we’re here. We’re your local tax experts and we’re here to help.
Here’s to a tax-efficient and very Merry Christmas!
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