Gifts

By Tolley in association with Philip Rutherford
Employment_tax_img10

The following Employment Tax guidance note by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Gifts
  • Introduction
  • Tax treatment
  • Non-taxable gifts
  • Trivial benefits
  • PAYE settlement agreement (PSA)
  • Exemption for small gifts made by third parties
  • Reporting requirements

Introduction

Employers may make gifts to an employee at various points in his career and for various reasons. This guidance note covers ad hoc gifts to employees. The amount incurred by the employer in respect of the gift to the employee is taxable unless it qualifies for a particular exemption from tax, such as the exemptions for certain Christmas gifts, long service awards or more generally available business gifts.

The Christmas bonus / gift to employees and Long service awards guidance notes provide more detail on Christmas gifts and long service awards. Other categories of non-taxable business gifts are discussed below.

If the employer provides a gift by way of voucher, see the Vouchers guidance note for more information.

HMRC guidance is at EIM01450.

Tax treatment

The tax treatment of the gift made to the employee is determined by the nature of the gift. See the Assets ― bought, sold or given guidance note for a detailed explanation.

Cash or money’s worth

A gift of cash or money’s worth is taxable as earnings and should be included in payroll as part of the employee’s earnings.

ITEPA 2003, s 62

If the gift is in the form of a cash voucher or similar then this will also be taxable as if it was cash. See the Vouchers guidance note.

Goods

If the employer gives goods to an employee then the higher of the cost to the employer or the resale value of the goods is taxable on the employee.

Assets

If an employer gifts an asset to an employee, there are specific rules governing the valuation and taxation of that gift. These rules are considered in the Assets ― bought, sold or given guidance note.

Non-taxable

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