Use your grey matter (tip5)
Blog Plummer Parsons | 26 October 2009
A question we are often asked every year at Plummer Parsons accountants, is "I don’t have to put the Christmas vouchers for my staff through the payroll, do I?"
The answer unfortunately is yes you do, or more accurately, a qualified yes.
Any gifts in cash, vouchers, and items readily convertible to cash or shares must be processed via your company payroll and are subject to PAYE and NIC.
What that often means in practice is that the vouchers you hand out at Christmas are often worth a lot less to employees than you think, for higher rate tax payers a whole 41% less than you think.
The qualified yes comes in the form of the ability to arrange a PAYE Settlement Agreement with HMRC. An employer can arrange to pay the PAYE/NI that may be due to HMRC rather than taxing the employees directly.
Gifts such as turkeys, hampers, chocolates, wine etc are not subject to the same rules. Instead these are classified as trivial gifts provided the value doesn’t exceed £30 per employee. Please note that agreement must be obtained from HMRC in advance to avoid the obligation to complete a P11D or to pay tax and NI.
Christmas is a time when we are often asked about whether a party is taxable or not. The figure that you are allowed for parties each year is £150 per employee.
The £150 is based on the aggregate cost of all such entertaining throughout a tax year and includes VAT, travel, accommodation etc. This total cost of the event is divisible by the number of attendees (including non employees) to arrive at the amount per employee.
If you exceed the £150 then the excess must be reported via P11D, even worse than that, it is not the total costs incurred minus £150 that has to be reported, but the total cost of the functions that exceeded the limit. For example, if you had two events in the year at £80 and £90 each then you would have to report the lower value function in its entirety. This is an easy mistake to make when looking at staff entertaining, you should be careful.
On the plus side it is a peculiarity of the regime is that everyone attending an event is entitled to £150 per annum. So employees’ spouses, for example, have their own annual entitlement too!
If you have any queries, then please contact our payroll manager Mrs Philippa Walker from our specialist payroll bureau on 01323 431200 or email her on p.walker@plummer-parsons.co.uk
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