Cookies are small text files that are stored on your computer when you visit a website. They are mainly used as a way of improving the website functionalities or to provide more advanced statistical data.
It's Christmas Party Time Mr Taxman!
Newsletter issue - December 07.
You may be about to have your firm's Christmas party and hand out seasonal gifts for staff and customers, but remember there are strict rules about what is deductible for tax and reclaimable for VAT.
The cost of entertaining customers or potential customers is not tax deductible for income tax or corporation tax. Your accounting records need to distinguish between the cost of hospitality such as the provision of food or drink, and significant gifts to customers, from other marketing expenditure. The amount classified as non-deductible entertaining is added back to the profits to calculate the tax due.
Free samples of the products or services your business normally sells are permitted, as long as you are not in the food or restaurant business. Small promotional gifts of any item are also acceptable if they cost less than £50 each and carry a clear advertisement for the business, although food, drink, tobacco and gift tokens of any value do not fall into this exemption. Small gifts worth more than £50 in total should not be made to the same person in one year.
You can't reclaim VAT on the costs of entertaining customers or potential customers. Where your staff are required to attend an event to act as hosts for potential customers, all of the VAT cost is blocked. A VAT registered business can reclaim the VAT on small gifts that cost up to £50 each, including gifts comprising of tobacco and alcohol.
Entertaining staff is tax deductible if it is not incidental to customer entertaining. The VAT on staff entertaining can be reclaimed, but a portion of the cost may need to be disallowed where customers also attend the event.
Staff entertainment can be tax free for the employees if it is in the form of an annual event or number of events to which all the staff are invited. However, you should try to limit the annual cost to £150 per head, counting all those who actually attend the event. If the costs exceed £150 per head (including VAT) your employees will be taxed on the total cost per head (not the excess above £150) as a benefit in kind. You as the employer can pay this tax on behalf of your employees through a payroll settlement agreement (PSA), but this does involve a degree of grossing-up, which can be expensive.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
Please complete our form
to request a callback
Competitive fixed quotes
for agreed services
Increase your profit and
reduce tax liabilities
Expert advice for your
business size
