Giving gift vouchers to staff can be a great way of incentivising performance, but what are the tax implications for your company?
From 6 April 2016 HMRC have provided further guidance on vouchers and these can now be allowed as a tax free gift and as a business expense. The new statutory rules include some relaxations to the pre 6 April 2016 position. For a benefit to qualify for the trivial benefits exemption, it must satisfy the following tests:
- The cost of the benefit cannot exceed £50 on each occasion (or the average across all employees)
- The benefit cannot be cash or a cash-voucher i.e. be exchanged for cash
- The employee cannot be contractually entitled to the benefit (including via a salary sacrifice arrangement)
- The benefit is not provided in recognition of services performed by the employee
If the cost exceeds the £50 limit, the whole of the benefit is taxed, not just the excess.
HMRC is concerned that smaller companies may take particular advantage of this, so any benefits provided to directors or other office holders (or their families) of close companies have the exemption capped at a total cost of £300 per tax year. So for example with these restrictions each director could take a non cash voucher every other month over a given tax year.
It is also that time of year when we are thinking of company disclosures of staff benefits for the 2016/17 tax year. The good news is that we no longer need to report reclaimed business expenses such as travel, and trivial benefits remain tax free. Typical examples of exempt items might include:
- Provision of workplace tea and coffee for staff
- Flowers or similar gifts on occasions such as marriage, birth of a child, illness etc.
- Seasonal gifts such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas
In order to qualify for the exemption, the gift cannot be part of any reward for services.
For further information on giving gift vouchers to staff and how you could use them in your business, contact us at CB Reid on 01305 215800 or info@cbreid.co.uk.