Staff payroll and Christmas gifts

There are a number of employers who pay their employees earlier than usual over the festive period, if, for example, the business is shut for Christmas and New Year.

Any businesses paying early need to ensure that the normal payment date is recorded on their Full Payment Submission (FPS) for December, and not the earlier pay date observed in December.

An example is provided where an employer pays staff on 18 December 2021 but would ordinarily have paid them on the last working day of the month, so 31 December 2021 would be the normal pay date. The pay date recorded on the FPS should be 31 December 2021, and the FPS must be sent on or before that date.

Taking this step will ensure that employers help to protect employee eligibility for Universal Credit, as reporting an early payment date could have an impact on their entitlements.

Christmas Gifts

Rewarding staff with a festive treat may not be gratefully received if it comes with a tax tag. For example, a gift of cash would be taxable as earnings in the normal way.

HMRC does not tax seasonal gifts to staff, such as a turkey, an ‘ordinary’ bottle of wine or a box of chocolates, so long as the cost is less than £50 a head (a trivial benefit). Gifts worth more than this, such as an expensive hamper or a case of wine, may have to be reported on the employee’s P11D, or included in a PSA.

There must be no contractual entitlement to a gift, and it cannot be given as a reward. But just because a gift is given each year, or is given to all staff, doesn’t mean the employee has a contractual right to it.

Cash vouchers given to employees are taxable in full in the same way as ordinary earnings. The face value of the voucher, regardless of the cost to the employer, has to be accounted for via PAYE.

Non-cash vouchers can benefit from the trivial benefit rules, so employees could be given a store voucher, for example, that does not exceed the £50 limit. Previously, non-cash vouchers had to be reported on the P11D, or included in a PSA.