Abacus November - December 2002

STAFF PARTIES - CAN YOU AFFORD IT

If you are providing a party or gifts for your staff at Christmas or any other time of the year then you and your employees may have tax and National Insurance to pay.

There is a tax concession allowing up to £75 per head to be spent for attending an annual function to be tax free, however there are pitfalls.
  • The function must be open to all employees, if not the function will be taxable.

  • Were any guests invited? If so this will not be taxable so long as the £75 per head is not exceeded.

  • If you have more than one function a year then the total costs must not exceed £75 per head, if they do the function that exceeds £75 per head will be taxable in full.

  • In addition to this if guests were invited then this can also be taxable.

  • The total cost per head must include all food and drink, entertainment, travelling costs to attend or get home, hire of the venue and any accommodation costs, you must also include the VAT.

  • Any gifts given at the party will be taxable.
In addition you must also consider the tax /National Insurance implications throughout the year.

GIFTS
  • Gifts given to employees at any time of the year, including flowers sent to employees are taxable, this extends to food, wine, and gift vouchers.

  • Long service awards so long as the employee has worked for the company for more than 20 years and the cost of the gift does not exceed the more than £20 per year of service will be tax free, as long as no other awards have been given in service.

  • Gifts given by third parties in certain circumstances may be tax free, unless the gift is cash then it will be taxable

  • The gift must not have been arranged by the employer with the third party, otherwise the employer must prepare forms P11d and pay the Class 1A National Insurance.

  • If the gift has been given as recognition of services or in anticipation of further services the employee must declare this on their tax return. The third party must also pay Class 1A NIC.

  • Have gifts cost more than £150 per person during the year if so the third party must pay the tax and NIC.

  • If all gifts are pooled it may be possible to avoid a tax charge for example if you had an auction for charity for the gifts in this case the revenue may decide the gifts are not taxable.

  • If gifts are business gifts they will not be taxable as long as they are not in recognition of employees services.


PAYE SETTLEMENT AGREEMENTS

The rate of National Insurance payable in respect of benefits in kind by employers for 2002/03 is 11.8% this can prove to be expensive in addition to this you will have to prepare forms P11d and P11D(b) for each employee that you pay over £8500 per annum.

If you do not want your employees to have to pay tax and NIC for parties and gifts you could enter into a PAYE settlement agreement (PSA).

You will have to pay (grossed up income tax for the employee at their highest rate of tax) tax and pay National Insurance on the benefit. The PSA needs to be agreed with the Revenue by the following 5th July in the tax year it is to relate to.

Should you wish Nunn Hayward to review your payroll arrangements for any of the above or other payroll issues, then please contact Mrs Suzanne Precious our Payroll Dept Manager or your usual contact.


NEW TAX CREDITS – COULD YOU RECEIVE OVER £5,000 A YEAR TAX FREE?

From April 2003 the Government are introducing two new tax credits called the Child Tax Credit and the Working Tax Credit, these new Credits replace Working Families Tax Credit, Children’s Tax Credit, Disabled Workers Tax Credit.

CHILD TAX CREDIT provides support for families with children and is paid directly to the main carer.

WORKING TAX CREDIT is paid to low income working people with or without children this will be paid to the main earner.

What you could get in April 2003¹

Annual
Income²		Families with children
(£’s a year)		Families with no children
(£’s a year)
One childTwo childrenSingleCoupleSingle Adult
NoMaxNoMaxwith a
(£)childcarechildcare³childcarechildcare³ disability
01,990 1,990 3,435 3,435 - - -
5,0005,0159,9556,46013,780- - 3,565
8,0004,5559,4956,00013,3201,0652,5653,105
10,0003,8108,7505,25512,5753201,8202,360
15,0001,9656,9053,41010,730- - 515
20,0005455,0551,5608,880- - -
25,0005453,2055457,030- - -
30,0005451,3555455180- - -
35,0005455455453,330- - -
40,0005455455451,480- - -
45,000545545545545- - -
50,000545545545545- - -
55,000210210210210- - -
60,000- - - - - - -


¹ Includes child and family premiums for Income Support/Jobseekers Allowance paid at Child Tax Credit rates for the period 2003/04 – 2004/05

² Those with incomes of £5,000 a year are assumed to work part time (working between 16 and 30 hours a week). In families with income of £8,000 a year or more, at least 1 adult is assumed to be working 30 or more hours a week.

³ To qualify for help with child care costs, you, and your partners if you have one, must work at least 16 hours a week. You will also need to use an approved child care provider (one who is registered with a local authority or OFSTED). You can receive help towards childcare costs of up to £135 a week for one child, or £200 a week for two or more children.

You can claim the tax credits either by completing the form that you should have received from the Inspector of Taxes, or you can complete the application online at www.inlandrevenue.gov.uk/taxcredits.

Alternatively contact the tax dept Nunn Hayward who will be happy to help.

Please contact us to discuss the above further

Tel: 01753 888211 Fax: 01753 889669 Email: abacus@nunn-hayward.com
Nunn Hayward, Sterling House, 20 Station Road, Gerrards Cross, Bucks SL9 8EL.


Chartered Accountants, Registered Auditors and Insolvency Practitioners. Authorised to conduct Investment Business under the Financial Services and Marketing Act 2000 and regulated by the Financial Services Authority.

This publication has been prepared as a guide only to topics of current financial and business interest. No responsibility for loss occasioned to any person acting or refraining from acting as a result of any material in this publication can be accepted by us. All rights reserved.

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