Employees are set for a very merry Christmas as UK businesses are now allowed to spend more tax-free money on staff parties, according to accountancy firm PKF.
As part of this year’s Budget, chancellor Gordon Brown decided that companies could spend up to £150 on entertaining staff without paying tax, up from £75 last year.
PKF said that many firms are not aware of the seasonal present offered by the chancellor and should take advantage by rewarding employees with an enjoyable Christmas party.
The accountancy firm explained that the ‘gifts’ do not end there, with long-serving employees and staff that work from home also set to gain under little-known Budget stipulations.
The tax-free limit for rewards to veteran workers has been increased to £50 per year of service – a rise of £30.
Meanwhile, staff who work from home have been exempt from income tax and National Insurance payments on reimbursed “incidental household costs”.
There is no need for employees to provide supporting evidence of costs where the payments do not exceed £2 a week and are “wholly in respect of additional household expenses incurred by the employee carrying out his duties at home.”
Simon Littlejohns, tax partner at PKF, explained that there were several other changes to employees and tax in Brown’s Budget.
“Meals provided as an incentive to employees participating in official cycle-to-work days will now be tax-free for any number of official cycle-to-work days designated by the employer – previously the limit was six per year.
“Also, employees receiving gifts from third parties, often the case from suppliers at Christmas, will not be taxed unless the VAT-inclusive value of the gift exceeds £250, which has been increased from £150,” he said.
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