Although this year many businesses are having to do their end of year celebrations differently, this is still the time of year when you usually spend more than usual on staff and client entertainment. Inland Revenue provides specific rules regarding different types of entertainment expenses. Here are some rules regarding Christmas business expenses that are helpful to know:
- Costs associated with a staff Christmas party, such as food, drink, venue hire and entertainment, are all 50% deductible.
- Gifts for customers or clients are usually classed as business expenses and are generally 100% deductible. Be aware, however, that if you are gifting food and/or drink to customers, clients or suppliers off-site of business premises they will be limited to 50%. Bottles of wine and food hampers fall into this category.
- Gifts for staff are generally fully deductible, but may be subject to PAYE or FBT depending on the nature of the gift. Generally:
− Gifts of cash are fully deductible, but subject to PAYE. The business should typically gross up the payment and include this in their payroll.
− Gifts of food or drink are fully deductible if subject to FBT, otherwise 50% deductible.
− Other gifts are fully deductible, but the majority will be subject to FBT unless certain “de minimis” exemptions apply. - If you take a customer out for a meal or provide one on your premises it is 50% deductible.
- Any donations your business makes to a registered charity, whether in the form of money, food or gifts are 100% tax deductible.