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Entertaining and benefits

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Here's the fortnightly Barwell's Banter column, from Nickie Barwell, of Barwell Accountants in Wisbech...

Employers often wish to make small gifts to their employees to show their appreciation of the efforts of the staff. Providing the gift meets the following conditions, it will not be a taxable benefit :

  • The cost of providing the benefit does not exceed £50 per employee;
  • The benefit is not cash or a cash voucher;
  • The employee is not entitled to the benefit as part of a contractual arrangement;
  • The benefit is not provided in recognition of particular services performed by the employee as part of their employment duties.

One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50.

A staff party or annual function also qualifies as a tax free benefit for employees providing the following conditions are satisfied:

  • The total cost must not exceed £150 per head each year;
  • The £150 includes VAT together with any extra costs such as transport and accommodation;
  • If the £150 limit is exceeded the whole amount is taxable, not just the excess over £150;
  • The event must be primarily for entertaining staff;
  • The event must be open to all staff.

A simple staff lunch can also be tax free if food and drink is provided over a lunchtime meeting and available to all members of staff. If everyone isn’t at the meeting then at least make sure that the left over food is shared by everyone else!

If you are looking to reward your staff in a tax free manner then mobile phones are a good option as they are a tax free benefit, even if there is no business use.

Computer equipment is also tax free providing that it is mainly used for business purposes with any private use being insignificant. This has certainly become more popular recently with the increase in home working due to Covid 19.

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