Our company gave gift hampers to all the managers. Each gift hamper costs £30.00 net. Are we allowed to claim the vat on it? Will this be treated as benefit in kind? And should the employees pay tax and nic. If so, can we put it through as an addition pay item and deduct the same on next payroll?
You can apply to HM Revenue & Customs for the gift to be treated as a trivial benefit and so ignored for benefit in kind purposes. In their guidance, they give a turkey, a bottle of wine, or a box of chocolates to be an example of what they consider to be trivial. Although £30 isn't a huge amount of money, the guidance does mention that things like hampers require more thought, so it's possible that HM Revenue & Customs won't consider this to be trivial.
As paying tax on your Christmas present from your employer tends to harm morale, the normal approach would be for the company to enter into a PAYE settlement agreement, whereby it would pay any tax that arose from the gifts.
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
No, input VAT can normally be reclaimed on business gifts. However, output VAT may need to be accounted for if the value of gifts to any manager during the last twelve months has exceeded £50. The guidance here has more details on this.
-- Edited by Robert Pearce on Thursday 29th of December 2011 04:06:14 PM
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
