HMRC is not hugely generous when it comes to enabling you to reward your staff. Anything involving hard cash will attract income tax and so deplete the value to the employee. The same is true of vouchers or indeed anything similar which is redeemable in place of cash.
That being said, there are a few concessions which HMRC makes to enable you to say thank you to staff for outstanding service, reward long service or just wish them a happy Christmas!
- Long service: if an employee has been with you for at least 20 years you can present them a gift. There is a but though. The value of that gift mustn’t exceed £50 for each year of service. So, if you’re celebrating a 20th anniversary you can present a gift to the value of £1,000.
- Suggestion scheme: as long as the scheme is ‘organised’ rather than simply a case of throwing ideas around in the pub after work it can net staff tax free rewards up to a maximum of £5,000. The actual figure should be based on a set percentage of the expected financial benefit of the suggestion to your business.
- Encouragement awards: merit based rewards are included in the concessions. A cash payment is allowed but only up to £25.
- Annual party: staff can party tax free – whether it be at a Christmas celebration, summer barbecue or awards night. Be aware though that the total cost of such get togethers can’t exceed £150 a year per person.
- Promotional gifts: each member of staff is entitled to receive promotional gifts which your business might usually use to advertise a corporate message up to the value of £50 a year. You may have to use some discretion as to what is suitable to be given to staff.
- Celebratory presents: in the strictest sense, all extras which employees receive, over and above their salaries and expenses, are subject to tax. However, HMRC does differentiate between gifts and benefits. Gifts might include flowers on the birth of a child, a bottle of wine to mark a birthday or a Christmas gift.
Rawlinsons is a firm of Chartered Accountants, Business and Tax Advisers providing a complete range of accounting, business, taxation and specialist services to more than 3,000 clients.