Here are the most frequently asked questions we've received in November 2022, with answers from the experts at Orange Genie Accountancy:
What is a Capital Allowance?
You can claim capital allowances when you buy assets that you keep to use in your business, for example equipment, machinery or even a company vehicle. These items are known as “plant and machinery”. You can deduct some or all of the value of the item from your profits before you pay tax. Not all assets qualify for a capital allowance and the rate of relief will vary. In most cases, items purchased which are allocated as “plant and machinery” would achieve 100 per cent relief via the Annual Investment Allowance (AIA).
Can I claim tax relief on a Christmas party for staff and customers?
If you host an annual staff party of event then the whole cost is an allowable business expense and will be tax free to employees as long as certain criteria are met:
The total cost must not exceed £150 per head, per year.
£150 includes VAT together with any extra costs such as transport and accommodation.
The £150 is a limit and not an allowance: if the cost is £151, the whole benefit is taxable.
The event must be primarily for entertaining staff.
The event must be open to all staff (in that location, if you have several branches or departments).
The event must not just be for directors unless all your staff are directors.
You can claim back input VAT but this may be restricted where you are also entertaining customers.
What are the rules around giving gifts to staff and customers at Christmas?
You don’t have to pay tax on a benefit for your employee where you make a small gift to your employee, including yourself if all of the following apply:
It cost you £50 or less
It isn’t cash or a cash voucher
It isn’t a reward for their work or performance, and
It isn’t in the terms of their contract
This is known as a “trivial benefit”
Gifts to customers are not allowed as a deduction against profits and are treated in the same way as business entertaining. There are exceptions where
The gift is part of a contractual agreement
The gift incorporates a conspicuous advert for your business (e.g with branding or logo) on the gift itself not just the wrapping.
The gift cannot be alcohol, food, drink, tobacco (unless that is your business) or vouchers.