Treating your employees over the Christmas holidays (or at any time, in fact!) is a tried and true approach to building a strong relationship with your team.

But did you know you might be breaking PAYE rules by doing so?

We want you to enjoy the holidays just as much as your team, so here’s some timely advice for staying on the right side of the tax man this Christmas.

Getting gifts right

Trivial benefits are items of value given to an employee which do not count towards taxable income or National Insurance Contributions (NICs).

To qualify, the gift must meet ALL of the following conditions:

  • The gift is below the value of £50
  • It isn’t cash or a cash voucher
  • It isn’t a performance-linked reward
  • It isn’t in the terms of the employee’s contract

For example, a trivial benefit in kind may include a Christmas lunch, a small Christmas present, or a gift on the day of an employee’s wedding.

If the gift does not meet all of the above criteria, it must be reported as a benefit in kind to HM Revenue & Customs (HMRC) and tax must be paid as appropriate.

What about incidental expenses?

Incidental expenses, as described by HMRC, are expenses “incurred by an employee while travelling overnight on business”. These might include buying newspapers, paying for laundry or using the hotel telephone.

Providing the value of the expenses do not exceed more than £5 per night for travel within the UK and £10 per night for travel outside the UK, they do not have to be reported to the tax man.

Further reading

For further reading on tax exemption for benefits in kind, click here.

Get in touch

If you require expert business advice this Christmas, do not hesitate to get in touch with our tax team.