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Source: HM Revenue & Customs | | 19/11/2019

Any Christmas bonuses / gifts paid in cash to employees, by employers, are almost invariably taxable as earnings. This view has been upheld by the courts on many occasions and can mean that a gift from a well-intentioned employer is worth less than the giver or the recipient initially expected.

If you are an employer and looking to give a Christmas bonus to your employees, then your best option is probably to give them a gift. To ensure that this is not a taxable gift, it is important to confirm that the trivial benefits in kind (BiK) rules apply.

The tax exemption applies to trivial BiKs where the BiK:

  • is not cash or a cash-voucher; and
  • costs £50 or less; and
  • is 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.

For example, a turkey that cost £45 would qualify as would a £15 bottle of wine. It is also possible to provide employees with a gift voucher (not a cash-voucher) if the value is £50 or less. It is important to remember that the gifts must not be provided in recognition of the employees’ services but merely as a gesture of goodwill at Christmas.

There is an annual cap of £300 for directors or other office-holders 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.

 

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