Client letter explaining the employee and employer tax consequences of staff entertainment and gifts to employees and directors
Produced in partnership with Victoria Kirsch of Baker McKenzie

The following Tax precedent produced in partnership with Victoria Kirsch of Baker McKenzie provides comprehensive and up to date legal information covering:

  • Client letter explaining the employee and employer tax consequences of staff entertainment and gifts to employees and directors

Client letter explaining the employee and employer tax consequences of staff entertainment and gifts to employees and directors

[Insert client’s address]

Income tax treatment of staff entertainment and gifts to employees and directors

    1. 1

      Purpose of this letter

      This letter explains the income tax and National Insurance contributions (NICs) consequences of providing staff entertainment (such as parties) and gifts to employees, for both the employee and employer. Throughout this letter, references to employees include references to directors (and other office holders, eg the company secretary) of the employing company.

    1. 2

      Staff entertainment—income tax and NICs treatment

      The provision of a party or staff event to employees will typically give rise to a taxable benefit for each employee (subject to income tax and Class 1A NICs), which must be included on the P11D or included in the PAYE Settlement Agreement (PSA) if one is in place with HMRC (a PSA is used when the employer has agreed to settle any income tax and associated Class 1A NICs (although the employer will pay Class 1B NICs as part of the PSA) arising on the provision of minor or irregular benefits on behalf of its employees) unless an exemption applies. The key exemptions from tax are outlined below.

      1. 2.1

        Annual employee parties

        There is an exemption from income tax and NICs where an employer provides employees with a social function and a number of conditions

Popular documents