As I understand it, there are a couple of tax breaks available to Directors:
Annual exemption which applies to an annual party or similar functions and is capped at £150 per head. The per head figure can include guests and where there is more than one event a year, the exemption applies to as many events as fall completely within the £150 per head allowance.
Also, the trivial benefits tax exemption allows a company to provide benefits costing not more than £50 to employees tax-free. The benefit cannot be cash or cash vouchers and, for directors of a company with 5 or fewer shareholders, the benefit is capped at £300 per year. The exemption can be used for example to provide a £25 monthly treat of flowers, a meal, or a bottle of wine.
What do other people record these under in the accounts? I think they need to be separated so its easy to keep an eye on the totals.
The £150 per head exemption is for annual parties which are open to all employees - or all employees at a particular location. If your only employees are directors, this will not be exempt. Any entertaining event which only includes directors is never exempt for tax purposes.
If you are inviting all employees, e.g. to a Christmas party or annual summer bbq, then the £150 per head is the combined total for all such events.
Such parties can be allocated to staff entertaining, or business entertaining for directors. Staff entertaining is allowable, business entertaining is not.
In terms of small-value gifts, I would code them to a nominal specifically for gifts to staff.
Dear all: I’d have a follow up question on this. HMRC writes: “You can’t receive trivial benefits worth more than £300 in a tax year if you’re the director of a ‘close’ company.”
My question: Is this the company’s tax year or the director’s tax year (April 6-April 5)?
In HMRC terminology a “tax year” is always 6th April to 5th April. What you loosely refer to as the “company’s tax year” would be called “financial year” or “accounting period” by HMRC.