The cost of an annual staff party is allowed as a deduction for tax purposes. However, the cost is only deductible if it relates to employees and their guests, which would include directors in the case of a company, but not sole traders and partners in the case of unincorporated organisations.
An employer may provide employees with a seasonal gift, such as a turkey, bottle of wine or a box of chocolates at Christmas. All of these gifts are considered to be trivial and as such are not taxable.
One cautionary regarding VAT and staff gifts is that VAT is chargeable by the employer when an employee receives gifts totalling more than £50 in a year.
Summary of tax changes announced in Autumn Statement 3 December 2014:
- Income tax free allowances increased to £10,600 for 2015/16 and rate of inflation increase also passed to higher rate taxpayers with the higher rate tax band raised to £42,385.
- Transfers of ISA’s to surviving spouses introduced so ISA status maintained and spouse can inherit tax free. The ISA allowance is to be raised to £15,240 in April 2015.
- Abolition of 55% tax on pensions handed down to family members to come into force in April 2015.
- Major overhaul of stamp duty land tax on purchases of residential property.