Millward, May & Co - Wokingham Accountants
Wokingham Accountants

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Tax Updates

💼 Making the Most of Employee & Client Perks

Offering perks to employees and clients is a great way to boost morale, strengthen relationships, and build loyalty. But without understanding the tax rules, what seems like a kind gesture can turn into an unexpected cost. Here's a clear breakdown of what’s allowed – and what to watch for.

✅ Tax-Free Perks: What You Can Offer

There are several benefits you can provide without triggering tax liabilities:

  • 🍽️ Office Canteen Meals provided at work are tax-deductible and allow VAT recovery, as long as they’re available to all employees and reasonably priced.

  • 🚗 Subsistence Food and drink bought while travelling to temporary workplaces can be reimbursed tax-free, provided the travel qualifies under HMRC rules.

  • 🎁 Trivial Benefits Gifts under £50 that are not cash/vouchers, not performance-based, and not contractual can be given tax-free. Directors are limited to £300 per tax year.

  • 🎉 Annual Parties Social events (Christmas parties, BBQs) are tax-free up to £150 per person annually – provided they’re open to all staff, are within budget and happen annually.

🍷 Client Entertainment

You can’t claim Corporation Tax relief or VAT on client entertainment – such as meals or event tickets – but it’s still worthwhile. Why?

👉 There’s no personal tax to pay.

👉 Think of it like taking a dividend to pay for client hospitality – but without the personal tax bill.

Just make sure the entertainment is reasonable and clearly business-related, or HMRC may challenge it.

🖊️ Client Gifts

You can claim Corporation Tax relief on gifts under £50 if:

  • They have clear company branding

  • They are not food, drink, tobacco, or exchangeable for cash

Branded pens, diaries or mugs are safe bets.

⚠️ Perks with Tax Implications

Some benefits must be reported on a P11D form each year and come with added tax and admin: Examples of reportable benefits include: medical insurance, gym memberships & company vehicles.

Costs Involved:

  • Employer pays:

    • The actual cost of the benefit

    • 15% Class 1A National Insurance.

    • Extra accountancy fees for preparing and advising on P11Ds.

  • Employee pays:

    • Income tax on the benefit value, at their personal tax rate (20%, 40%, or 45%)

Deadlines:

  • P11D submission deadline: 6 July following the end of the tax year (which runs from 6 April to 5 April).

  • Class 1A NIC payment deadline: 22 July following the end of the tax year.

✈️ Staff Incentive Holidays

Rewarding staff with a holiday for hitting targets? Nice idea – but expensive!

This must be reported to HMRC via a PAYE Settlement Agreement (PSA).

  • You pay the tax on the employee’s behalf

  • PSA tax is calculated on an estimated value of the benefit

  • Add in additional accountancy fees – and you’ve got one of the most expensive ways to motivate your team

Deadlines:

  • Must notify HMRC by 5 July following the end of the tax year (which runs from 6 April to 5 April) that you intend to use a PSA.

  • Submit the PSA form and pay the tax due to HMRC by 22 October following the end of the tax year.

🤝 Need Advice?

Whether you’re planning a team reward or entertaining key clients, we’ll help you structure it the right way – making sure it’s compliant, cost-effective, and hassle-free.

📞 Get in touch with us today to talk perks that work.

Millward, May & Co