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December 2013

To Gift or Not to Gift This Christmas?

'Tis the season to be jolly and to avoid being the office Scrooge, but just how generous can you, as an employer, afford to be? Select the wrong gift and as an employer you could end up gifting more than you bargained for in tax for both you and your employee.

To prepare you for the gifting season, Bob Bain, Partner at Hall Morrice, challenges you to take the Hall Morrice Secret Santa challenge to see how clued up you are this December.

Choosing from the following, please select which of these corporate Christmas gifts you can give to your staff, tax free.

  1. A bottle of Champagne
  2. A bottle of wine
  3. A box of luxury chocolates
  4. A flu vaccination
  5. A food hamper of local produce
  6. £45 cash bonus
  7. Turkey Crown
  8. £50 voucher for a designer shop
  9. A bottle of aftershave/perfume 50ml
  10. Leather bound diary

Bob comments, "Surprisingly, the only gift you can give tax free from this list is the flu vaccine - although perhaps not the most appealing. Choose the champagne, chocolates, hamper, turkey or voucher and both the employer and employee could be tax liable. A £50 High Street store voucher might seem a good way to reward staff at Christmas but actually, between the employer and the staff member, there would be a further liability of £22 in tax and national insurance. The employer would have to pay Class 1 NIC (National Insurance Contribution) payments for the cost of the voucher. The gift would then have to be declared on an annual P11D and the employee would be liable for income tax. Some companies choose to have a PSA (PAYE Settlement Agreement) to prevent employees having to put gifts such as this on a P11D. If an employer does wish to give employees anything additional, they should first apply to the HMRC in advance. If tax is payable it may then be included within a PSA."

Luckily, the Taxman does consider small items to be trivial benefits and can be given as tax - free gifts to employees. There is, however, a fine line between a trivial benefit and a benefit in kind. The difference of a couple of extra turkey pounds in weight can make all the difference.

Bob explains why it's important to be vigilant with taxable gifts, "I advise all clients not to go overboard with Christmas gifts as it can backfire in the form of tax liabilities for both employer and employees. Trivial items are hard to define - but outlined in the HMRC employment income manual - seasonal gifts, such as a small turkey, chocolates or an ordinary bottle of wine, are suitable tax-free gifts. But beware; a decadent box of chocolates is unlikely to be trivial.

Gifts to employees are not as straight forward as they might appear and should be considered carefully. And who knows, perhaps for Christmas 2014, employers will choose one of the few tax free options and select mass flu immunisation. A flu free workforce is certainly a happier workforce than those with surprise tax at the end of the year.

As with many tax issues there can be exceptions and fine details to consider. Hall Morrice can offer practical advice and assistance regarding Benefits in Kind, as well as a wide range of financial guidance including accounts, audit, business advisory, corporate finance and taxation services.

Founded in 1976, Hall Morrice is one of Scotland's leading independent firms of chartered accountants and has offices in both Aberdeen and Fraserburgh. Based at 6 & 7 Queen's Terrace in Aberdeen, Hall Morrice can be contacted on 01224 647394 or at

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