With the festive period upon us, some employers may want to provide their employees with a gift or bonus, but how will this affect your payroll?
All cash bonuses paid at Christmas count as earnings and must go through payroll in the normal way. Non-cash vouchers, and benefits with a money’s worth are also counted as taxable earnings and must go through payroll. Some employers may wish to pay the tax and NIC the bonus will attract, so that the employee receives the full cash bonus in their pay packet. Most payroll providers can ‘gross up’ bonuses without too much trouble.
Employers may choose to provide their staff with goods as a seasonal gift (items that cannot be resold or exchanged for cash) such as a turkey, or a bottle of wine. It is generally considered that items with a cost value of under £50 are deemed as trivial benefits with HMRC, so there is no liability or reporting requirement and are not included in a PAYE settlement agreement (PSA). If the gift is larger, such as a crate of wine or a hamper, HMRC may not consider this as a trivial benefit, and should be reported on a P11D as a benefit (for employees with earnings above £8,500).
THIRD PARTY GIFTS
Small gifts of goods can be given to third party employees, as long as the gift is not made in recognition of the provision of services; it is not provided by the employer or anyone connected to the employer and the cost is less than £250.00
Christmas parties are exempt from tax and NIC if they meet these 3 conditions:
* It is an annual event, such as a Christmas or New Year party
* The event is open to all employees to attend
* The cost per head is no more than £150.
The entitlement applies to each attendee, including guests, but the total cost cannot be offset against the cost of a more expensive event. If the £150 per head limit is exceeded, there is no exemption and the full cost would be considered a benefit on the employees who attended.