Healthy Appetite for Tax
Most forms of staff entertaining are taxable on them and you. However, if you use the so-called "staff welfare" loophole by showing the reason for entertaining away from work the costs should be tax-free.
Your top salesman's local restaurant is a great place to do business. He's a regular. Naturally, he obtains a receipt to prove he's had lunch there. He also pays for it with the company credit card to avoid a tax liability So he returns to the office, refreshed and ready for the afternoon's business. Why would the Taxman object to this?
The answer is that he wouldn't object at all. In fact, he'd positively encourage it. Because he'd look to charge the employee tax on every meal eaten there at the business' expense. As it's regarded as a benefit-in-kind, he has to pay income tax on it and you, as the employer, would be charged National Insurance at the rate of 11.8% (12.8% from April 6).
What if it were entertaining?
What if your salesman used the restaurant as a place to "do deals" ? Better news. Reasonable costs of entertaining customers and suppliers, though not deductible against the company's profits, aren't taxable on the employee (and no NI for you).
Your employee will need proof of the purpose of the meal. Get him to keep a record of whom he ate with, when and why
So what about the staff?
So you can see the general principles involved - the Taxman takes the view that you have to eat to survive and that survival isn't a tax-deductible expense! So, say you wanted to take your staff to lunch once a month, you know the sort of thing - a cross between a pep-talk and a social gathering. At first glance, the Taxman would say, "That's purely a benefit. You must declare the value on each employee's P11d They'll have to pay tax and you'll be charged NI. And you can't claim the expense against profit." Not much of an incentive for a trip to the pub is it?
Tax loophole
There is a loophole that you can exploit. The Taxman has an Extra Statutory Concession that will allow you to take staff to e.g. lunch away from work and it not be taxable on any party. To take advantage of the Concession you'll need to convince the Taxman that it all boils down to "staff welfare" (the way the expense is described in your accounts).
Tip 1. Have a reason for the meals out. Staff meetings and appraisals can be delicate subjects requiring a change of scenery.
Tip 2. Keep records of these off-site "meetings" -whom they were with and why they were held.
Who pays?
For the Concession to operate, who pays and where you eat is important. For staff earning less than �8,500, if the restaurant etc bill is settled directly by the employer, there's no tax to worry about. However, for those earning above this sum the rules say the restaurant, cafe, pub etc. must provide a private room for the purposes of staff welfare for it to be tax-free, and the employer must pay the bill.
Most forms of staff entertaining are taxable on them and you. However, if you use the so-called "staff welfare" loophole by showing the reason for entertaining away from work the costs should be tax-free.
Your top salesman's local restaurant is a great place to do business. He's a regular. Naturally, he obtains a receipt to prove he's had lunch there. He also pays for it with the company credit card to avoid a tax liability So he returns to the office, refreshed and ready for the afternoon's business. Why would the Taxman object to this?
The answer is that he wouldn't object at all. In fact, he'd positively encourage it. Because he'd look to charge the employee tax on every meal eaten there at the business' expense. As it's regarded as a benefit-in-kind, he has to pay income tax on it and you, as the employer, would be charged National Insurance at the rate of 11.8% (12.8% from April 6).
What if it were entertaining?
What if your salesman used the restaurant as a place to "do deals" ? Better news. Reasonable costs of entertaining customers and suppliers, though not deductible against the company's profits, aren't taxable on the employee (and no NI for you).
Your employee will need proof of the purpose of the meal. Get him to keep a record of whom he ate with, when and why
So what about the staff?
So you can see the general principles involved - the Taxman takes the view that you have to eat to survive and that survival isn't a tax-deductible expense! So, say you wanted to take your staff to lunch once a month, you know the sort of thing - a cross between a pep-talk and a social gathering. At first glance, the Taxman would say, "That's purely a benefit. You must declare the value on each employee's P11d They'll have to pay tax and you'll be charged NI. And you can't claim the expense against profit." Not much of an incentive for a trip to the pub is it?
Tax loophole
There is a loophole that you can exploit. The Taxman has an Extra Statutory Concession that will allow you to take staff to e.g. lunch away from work and it not be taxable on any party. To take advantage of the Concession you'll need to convince the Taxman that it all boils down to "staff welfare" (the way the expense is described in your accounts).
Tip 1. Have a reason for the meals out. Staff meetings and appraisals can be delicate subjects requiring a change of scenery.
Tip 2. Keep records of these off-site "meetings" -whom they were with and why they were held.
Who pays?
For the Concession to operate, who pays and where you eat is important. For staff earning less than �8,500, if the restaurant etc bill is settled directly by the employer, there's no tax to worry about. However, for those earning above this sum the rules say the restaurant, cafe, pub etc. must provide a private room for the purposes of staff welfare for it to be tax-free, and the employer must pay the bill.
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posted by Haydn at
02:59
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