Christmas is coming

December is almost upon us, and in the run up to Christmas, it is worth while remembering some of the festive season tax rules! For a Christmas party to be tax-free, it must be open to all staff with a maximum spend of up to £150 per head. Beware though - exceed this limit and the full amount spent will become liable to income tax and NIC. Employers can pay for more than one social event during the year, and it is only the one that takes the total per head over £150 that becomes taxable, so a rolling total must be kept. Flexibility is, however, given over which events best use the £150 overall limit.

The £150 limit includes all costs associated with the event, such as entertainment, accommodation, venue, transport - including hired coaches or taxis home and VAT. Employees can take their spouses, family and friends, and each guest will have a £150 exemption. However, employers cannot claim back any VAT incurred in respect of guests.

A Christmas bonus should be taxed under PAYE if it is paid as part of your wages. Gift vouchers will usually be treated as a taxable benefit in kind, although more generous employers may opt to pay any PAYE costs arising.

Employers can provide staff with gifts such as a box of chocolates, a turkey or a bottle of wine or two at Christmas. These are known as "trivial benefits" and do not have to be reported to the tax man each year, and so are not taxable. Unfortunately there is no definition of the maximum value of these benefits, so probably best not to give away Harrods hampers! Happy Christmas!