Sometimes you'll buy your employees gifts, either as an incentive to retain them or as part of their package. When you do this, you need to make sure you are recording that as a benefit in kind.

What's included

The following expenses are examples of things you could purchase for your employees:

  • Gift cards or vouchers to a department store or shop.

  • Tickets to the game or a theatre show.

What's not included

  • Amounts given to your employees in cash.

  • Paying for a fine on behalf of your employee.

How is it taxed?

If you want to provide a gift to your employee for rewarding their service you can categorise this in Staff Rewards and pay the tax on it via a PSA. Otherwise any other purchase of gifts for your employees is deemed a 'Benefit in Kind' (BIK) and the employee must pay personal tax on it. The company is also liable to make National Insurance Contributions at 13.8% on any BIK.

Tax tips

It's important to distinguish between those benefits you wish to pick up the tax on as a company and those that you wish to pass on to your employee. For example asking your employee to pay the tax on a bottle of champagne you have bought them as a reward would be a bit strange.

One to keep in mind is that a BIK is considered trivial if it is less than £50 in value.

Useful links

Claiming VAT on employee rewards and perks.

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