For some employers, the huge list of things you might want to claim could include gifts for employees. Wanting to treat your staff from time to time is a lovely quality to have as an employer, but a lot of business owners aren’t sure where this leaves them in terms of claiming the expense against tax.

We’ll explain the rules for claiming the cost of staff gifting.

Do employee gifts count as an allowable expense?

In some cases, yes, presents you give to your employees are an allowable expense and you can claim tax relief on the value before tax. The rules are quite complicated though, with the outcome depending on what the gift actually is, its value, and who you give it to.

HMRC publish a list of expenses and gifts, and what businesses must do for each.

Gifts classes as ‘trivial benefits’ are usually an allowable expense.

Does it count as a trivial benefit?

A gift or small gesture to an employee can be classed as a ‘trivial benefit’. Something qualifies as a trivial benefit when:

• It costs the business less than £50 (including VAT)
• It isn’t a direct reward for employee performance
• It isn’t included within the terms of their employment contract – i.e., not something they’re obliged to receive. This includes any salary sacrifice setups.
• It isn’t cash or a cash voucher (gift cards qualify as long as they aren’t exchangeable for cash)

Where a gift meets all of these criteria, you don’t have to let HMRC know about it, or pay any tax or National Insurance on it.

If your business is a close company (a limited company controlled by five or fewer individuals), then an overall spend on trivial benefits in any tax year is capped at £300 per employee.

What happens if you spend more than the threshold for a trivial benefit on an employee gift?

You can still gift your employee a voucher that’s worth more than £50, but it will become taxable to both you and the employee under the benefits in kind tax rules.

The rule was introduced to make sure employers aren’t tempted to swap an employee’s pay for something of the same value – because this could help them avoid the tax and National Insurance which would otherwise need to be paid on the salary. To minimise the risk of this happening, if you buy a gift that exceeds the trivial benefit threshold of £50:

• You – as the employer – will be required to pay National Insurance on it
• Your recipient – the employee – will also be required to pay Income Tax on the value of the gift

You’ll need to report the benefit using your payroll software each time you run payroll and PAYE.

Does a cash bonus count?

Cash rewarded to staff in the format of a bonus will be counted as additional earnings on top of their standard salary. That means that PAYE tax and National Insurance will need to be paid through payroll.

Ways to show staff you care without spending money

If you’re working with a shoestring budget, or you prefer to dodge the hassle of working out if a gift is going to be an allowable expense or not, consider a non-monetary gesture instead.

You don’t have to splash the cash to show employees you appreciate them and that you’re grateful for their hard work. Here are just a few great ways to treat your staff without having to spend (much) money:

• An extra day of paid leave
• Flexible working hours
• An early dart on Fridays during the summer months
• An office party in their honour
• A parking space reserved just for them
• A long lunch
• Organise a staff games day on site
• Additional training and development
• Sing their praises (recognition goes a long way)

 
Hope this article answers all of your queries on the topic of staff gifts and allowable expenses. Got some more tax-based questions on your mind? Let us know!

The post Are Staff Gifts an Allowable Expense? appeared first on The Cheap Accountants.

Common examples of staff benefits might include gym membership, health care, or the cost of their daily travel. Providing perks like this can be good for workplace morale, but it’s entirely up to you whether or not you decide to go ahead.

It’s generally something which benefits the employee personally in some way, rather than solely something they need to do their job.

Before making any decisions it’s crucial that you understand the potential tax implications of offering perks to your employees. Known in the tax world as benefits-in-kind, this might impact both you as the employer, as well as your employees.

Is it worth offering benefits in kind to my staff?

Staff perks are a way of adding value to what staff receive from you, on top of their existing pay. Combining these so-called fringe benefits or BiKs with a base-line salary can help you build a very attractive employment package, which in turn can be a valuable tool for recruitment and staff retention.

Attracting great staff with a strong recruitment package

The recruitment market can be very competitive, especially if you have niche roles or gaps in your expertise to fill. It’s why some employers decide to make the idea of working for them as attractive as possible. This usually involves offering a competitive salary, but adding other value, such as perks, can also help sway things in your favour.

Retaining great staff with perks

Everyone likes to feel like they’re being recognized, so showing appreciation to existing employees can help you keep them around for as long as possible.

Make life easier for your employees

A good example of this is providing a company car to an employee whose role requires a lot of travel. It shows that you’re thinking of their comfort and wellbeing, and can be a good option for them if they don’t need to up-front the cost of travel before claiming it back later.
 

What are the tax implications of benefits in kind?

These so-called fringe benefits might not take the form of cash, but they do have a financial value, and as such tax may be subject to tax and National Insurance. This means that employees can’t simply be paid in perks rather than their normal wages as a way of avoiding tax!

The slightly confusing part about BiKs is that some of them are taxable, and some aren’t.

For instance, work-related training or safety clothing and equipment your employee needs to do their job may not be classed as a benefit!

How to report benefits in kind with a P11D

You might sometimes hear these staff perks referred to as P11D benefits because of the name of the form used to report them to HMRC.

If you have staff and you offer them any type of perk, you must submit a P11D to let HMRC know about it, including the relevant dates and values of all benefits in kind provided. You can do this:

• Via your own payroll software
• Using HMRC’s PAYE Online service once you’re registered for PAYE
• Through the post

If you already pay tax on employee benefits via your payroll system (like you might do with any deductions you make on their wages) you won’t need to submit a P11D for them.

However, whether you already deduct and pay tax on employee benefits through your payroll or not, you do still need to be aware of P11D(b) forms.
 

What is a P11D(b)?

A business owner is required to submit a P11D(b) form at the end of each tax year to let HMRC know how much Class 1A National Insurance needs to be paid. This is because employers make National Insurance Contributions (NICs) on the value of BiKs their employees receive, including company directors.

A P11D(b) also summarises each employee’s individual P11D.
 

Do I need to tell my staff about the P11d form?

You don’t legally need to provide employees with a copy of the BiKs information you submit, but we do recommend it. If there are any issues with their pay or tax record, it makes things much simpler to sort out!

Reminder: Don’t forget to keep all your receipts and expense forms organised, filed away and accessible for a minimum of six years as part of good bookkeeping and accounting practices.

Feeling stuck? We’d recommend seeking the support of a qualified accountant. Compare accountancy packages here to get started.

The post Do I Have to Give Perks to Staff? appeared first on The Cheap Accountants.

Realise your advantages

Whilst feeling daunted by larger competitors, it is easy to lose sight of the fact that you have advantages too. Many individuals don’t want to be a ‘cog in a machine’. They want to be able to make their mark and have their individual contribution recognised.

As a small employer you have the ability to offer individuals diverse roles which allow for their self-development. You can be flexible and easily notice value-added rather than hours put in. Realise that you have advantages as an employer.

Be a good boss

There a number of reasons why individuals become dissatisfied in their role and leave. This may include advancement opportunities or a change in personal circumstances.

Frequently cited is a poor relationship with their boss. This is in your control. You cannot put a price on the positive relationship you build with your employees. It makes them want to come to work and give their best. Don’t underestimate its power.

Ask them how they are, what their children are up to, or what they did at the weekend. Take an interest in their volunteering. Simply show that you are interested.

Be appreciative

You may not be able to throw performance related pay in to the mix, or dish out large bonuses but this doesn’t mean you can’t show appreciation. Make sure you notice when someone does something well and say so. Let them leave a little early to go to their child’s sports day without using annual leave because they worked late to get that last project out. Give them a Christmas gift with meaning.

Be collaborative

A huge advantage you have over large businesses is that you can make the organisational structure relatively ‘flat’ without tiers which create an ‘us and them’ culture. Instead, show that you value the individual contribution of each employee by actively seeking their collaboration in a range of different areas.

Create a nice place to work

Small employers can create workspaces which are unique and personalised. The result is a nice and comfortable working environment conducive to productivity. This can extend to allowing remote working (where feasible) or break areas which encourage creativity.

Pass on the feedback

When positive feedback comes in, share it with the relevant employees. Your business thrives because you aren’t faceless, so thank the very faces who are making it work. A quick email to say it’s been noticed can create a real feel good factor to someone’s day. Similarly, keep a stock of small rewards (e.g. gift cards) which you can hand out at impromptu moments for a job well done. It’s about recognising the individual.

Be creative with benefits

You may not be able to offer private health care or generous car packages, but that doesn’t mean you can’t offer benefits which your employees value. Perhaps provide lunch on Fridays through a local sandwich delivery company, or give generous annual leave allowances.

What does your small business do to keep employees happy?

The post How can you compete with bigger businesses to keep your employees happy? appeared first on The Cheap Accountants.