insideKENT Magazine insideKENT Issue 69 Dec 2017 - Page 189

BUSINESS HAVE YOU P11D’D YOUR CHRISTMAS TURKEY? BY RICK SCHOFIELD, TAX PARTNER AT WILKINS KENNEDY IT’S THAT TIME OF YEAR WHEN OUR MINDS TURN TO GIVING A LITTLE SOMETHING FOR CHRISTMAS. EMPLOYERS PARTICULARLY WILL WANT TO REWARD HARDWORKING STAFF FOR THEIR EFFORTS THROUGHOUT THE YEAR AND IN TURN, YOUR EMPLOYEES WILL APPRECIATE THE GESTURE OF A GIFT. TO MAKE THE DEAL EVEN SWEETER, THERE COULD BE SOME TAX ADVANTAGES ALONG THE WAY TOO – BUT BEFORE YOU TREAT YOUR TEAM, IT PAYS TO CHECK HMRC GUIDELINES AS THE LINE BETWEEN WHAT IS CATEGORISED AS TAX FREE AND WHAT MAY INCUR A TAX LIABILITY IS A FINE ONE. What counts as a gift? Well, to the tax man, it could be a different thing to what the rest of us recognise as the simple exchange of a little something wrapped in shiny paper. Depending on what you give, HMRC could recognise the gift as taxable. Employers are allowed to provide staff with a seasonal gift such as an ordinary bottle of wine, a box of chocolates at Christmas, or even the turkey itself; these all fall under the banner of trivial benefits, meaning they’ve no real resale value and cost less than £50. This £50 rule applies regardless of the size of your organisation. If you are a larger employer, and therefore you have a large head count, the total cost of providing a gift to each employee can mount up considerably, however this is of no relevance to HMRC. As long as the gift in question is a trivial one for each employee, the taxable benefit is the same. As such, if a benefit is deemed trivial, it does not need to be declared on either a P11D form, or included in a PAYE Settlement Agreement. However, should you decide to scale-up staff gifts from a bottle to a case of wine, or pop your turkey into a Christmas hamper alongside all the trimmings, you will need to consider the contents and cost before being able to determine whether the benefit is trivial or not. If it is not, which is highly likely in the case of these two examples, the cash equivalent must be taxed using form P11D, or PAYE Settlement Agreement. So, you might want to think before you start to record turkeys on P11D, as it could be avoided. If that sounds too complicated, you might consider an alternative in the form of a small bonus or cash payment to employees. If you do this, these will be taxable at source, attracting both PAYE tax and National Insurance. This also applies to store vouchers, which are also subject to tax for the full value of the voucher. So, if after weighing up the pros and cons, employers wish to provide st ore vouchers for their staff, without having to report them as a benefit in kind, a PAYE Settlement Agreement can be arranged with HMRC. This allows the tax and NICs to be calculated on the grossed up amount of the voucher, and the employer pays this on behalf of the employee; a win-win in the interests of preserving Christmas spirit. Of course, don’t let the taxman put you off the spirit of giving, but if you would like some further advice about rewarding staff, Benefit in Kind or any other employment or tax issues, please contact Wilkins Kennedy in Ashford, Canterbury, Maidstone, Orpington and Sandwich. Local offices: Ashford: 01233 629 255 / Canterbury: 01227 454 861 Maidstone: 01622 690 666 / Orpington: 01689 827 505 Sandwich: 01304 249 997 wilkinskennedy wilkinskennedy 189