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Do you want tax free presents this Christmas!? 4 Tips for how to do it with your limited company

Here at Peter Jarman + Company we are always on the lookout for ways to help our clients. Peter the managing partner of the firm found out this little gem and wrote the following blog about it, I hope you find it useful and gets you in the Christmas spirit early.

Tax free gifts this Christmas!

There have been some changes made by HMRC to the taxable benefits legislation, this allows you to buy Christmas presents (including Food and Wine) tax free this Christmas!

How it works

Using the newly introduced “trivial benefits exemption” as a director of your own company, you can purchase presents costing individually less than £50 each up to a maximum of £300 in any one year.

This change means HMRC will allow you, for example to buy yourself wine or your children computer games costing less than £50 each for Christmas and get tax relief on the cost.

Taking into account, tax national insurance and dividend tax this could be a saving of up to £150 on £300 worth of presents.

How to do this

To qualify for this tax free benefit, you must keep within the rules:

  1. The benefit must not exceed £50
  2. The present must not be cash or a cash voucher
  3. The benefit must not be a contractual obligation or in recognition of work done, come up with a good reason like… It’s snowing (or not snowing) at Christmas and the moment moved you!
  4. The total benefits are capped at £300 per year.

The rules are per company so if you run two companies you can do this twice! If your spouse is a director too she can also use the allowance in her own name so now we could be looking at £1,200 worth of presents all costing less than £50 each.

If you use your “household rules” to give presents remember that your spouse and children need to be living at home.

What HMRC has to say about this

HMRC’s guidance on this is set out at:

https://www.gov.uk/government/publications/tax-exemption-for-trivial-benefits-in-kind-draft-guidance/tax-exemption-for-trivial-benefits-in-kind-draft-guidance

….and finally remember you could always check with your accountant to make sure you remain within the rules… And buy them a bottle of wine this Christmas on HMRC, if you would like.

Peter Jarman

Peter Jarman is the managing partner of Peter Jarman + Company, a firm of accountants based in Shoreham near Brighton. Since 1989 Peter has been doing his best to help his clients save money on their tax legally with advice just like this.

Peter Jarman FCCA
LLP Partner
Peter Jarman + Company
Chartered Certified Accountants

 

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