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Can my business pay for GIFTS to CUSTOMERS and is it TAX DEDUCTIBLE?

Can my business pay for GIFTS to CUSTOMERS and is it TAX DEDUCTIBLE?

At Christmas lots of business owners give their customers a little something to say thank you each year.  Have you ever wondered if this is tax deductible?

A bottle of wine or whisky are probably the most common. The question I get asked is……can the business pay for it?

In this article I’ll answer that question AND highlight other tax savings …that business owners fail to claim for.

And by not claiming the business ends up paying more tax and VAT than they could…

 

1 GIFTS TO CUSTOMERS

The cost of giving gifts to customers IS tax deductible, providing you stick to these 3 things: a. The amount spent per customer is £50 or less

  1. The item is NOT alcohol/food/tobacco
  2. Your company name is conspicuous on the gift itself

 

2 GIFTS TO YOUR STAFF

The cost of giving gifts to staff Is tax deductible– as long as…

  1. The amount spent per employee is £50 or less
  2. The item in question is NOT cash or cash vouchers

 

3 TRIVIAL GIFTS TO COMPANY DIRECTORS

Did you know that up to £300 of gifts (HMRC calls them ‘trivial gifts’) can be bought each year for any director or company secretary of a limited company?

Amazingly, any family member (of a director/chief exec) who is an employee (i.e. on the payroll) of the same limited company can ALSO get £300 of trivial gifts each year!

The cost of any trivial gifts you buy ARE tax deductible….as long as each gift…

  1. cost you £50 or less to provide
  2. isn’t cash or a cash voucher (Gift vouchers are ok as long as they can’t readily be converted into cash)

 

4 TRIVIAL GIFTS TO STAFF

An employer may want to give a seasonal gift to their employees such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas.

The cost of trivial gifts ARE tax deductible.

 

5 STAFF PARTIES (Incl. Christmas Party)

Christmas parties are a great way of rewarding your team at the end of a year.

The cost of Christmas parties IS tax deductible (& VAT claimable) providing you stick to these strict rules. Those rules mean that the party…

  1. Cannot cost more than £150 (incl. VAT) per person
  2. Must be an annual event e.g. a Christmas party or summer party
  3. Must be open to all of your employees (and must consist mostly of employees)

In addition to the meal and drinks a business can also claim for the entertainment, room hire, taxi home and, if needed, the overnight stay in a hotel.

And finally…you can have as many annual parties or events (xmas, summer etc) as you like BUT the total cost of them all must NOT exceed £150 per person because if you spend more than this then NONE of the cost can be claimed. Ouch.

 

6 GET YOUR LITTLE HELPERS ONTO THE PAYROLL

Many family business owners get their children stuck in around the office – especially in the run-up to events and seasonal occasions.

And there are countless jobs that need to be done!

Whether it be admin, cleaning, packing in the warehouse or manning the shop, dropping leaflets through letter boxes, an extra pair of hands is always welcome.

If you’ve got a little helper aged 13 or over then make sure they’re on the payroll! Just remember they should be….

  1. Paid a reasonable rate (& is at least the National Minimum Wage) for the work that they do
  2. Paid just like any other employee

The cost of their wages IS tax deductible.

If you think these changes might affect you and you’d like our opinion and help please get in touch straightaway.  Call us on 0161 410 0020 or email [email protected]

Disclaimer
It is important that you take professional advice before making any decisions based on the information that you learnt here. While every effort has been made to make sure it is accurate it cannot be precisely tailored to your personal circumstances. This article is for general information only and no action should be taken, or refrained from, as a result of this information.  Professional advice should be taken based on specific circumstances in each individual case.  Whilst we endeavour to ensure that the information contained in the article is correct, no liability will be accepted by Krystal Clear Accounting which is a trading name of Kim Marlor Associates Ltd or damages of any kind arising from the contents of this communication, or for any action, inaction or decision taken as a result of using any such information.

What are Bank Feeds and how do they work?

In short, bank feeds create a digital link between your business bank account and your accounting software, such as Xero or QuickBooks.  

This means bank transactions are automatically downloaded into the accounting software. This simple piece of automation, completely removes the need to manually input every bank receipt and payment into the accounting software. 

Having bank feeds in place, saves a HUGE amount of time bookkeeping. That’s because it completely removes the need to manually input bank transactions into the accounting software. 

Saving time bookkeeping isn’t the only benefit for the business…. 

 

 

Tax deductions

What are the main benefits to a business using bank feeds?

  • Saves Time & Money Bookkeeping

Bank feeds automate, what was previously, a time-consuming task of entering all the bank transactions into the accounting software. 

 This saves the business a HUGE amount of time (& money) spent on bookkeeping.  

  • Improves Cash Flow Visibility

With bank transactions being downloaded from the bank every day, it means it’s quicker and easier to keep the bank balance in the accounting software up-to date. 

With the accounting software up-to date, the bank is updated daily which gives you a clearer, real-time view of your business’s cash flow.  

This makes it easier for you to plan your cashflow, and take action to improve it. 

  • Enhanced Accuracy

There is always the risk of errors being made when data is being manually inputted into the accounting system. It is often time-consuming to find and correct any errors. Also, if an error is large then the Profit & loss and Balance Sheet reports will be inaccurate and potentially misleading. 

 Automating the bank transaction entry previously manual process, reduces the risk of errors being made and ensures that the bookkeeping records and reports are accurate. 

How to Link Your Bank to Xero

  • 1. Setup Online Banking:

Ensure that your bank account is set up for online banking. This feature is typically available from all major banks. 

  • 2. Add Bank Account in Xero:

Log into your Xero account and navigate to the banking section. Select ‘Add Bank Account’ and follow the prompts to search for your bank. 

  • 3. Enable Bank Feeds:

After adding your bank account details, you’ll see an option to set up bank feeds. Click ‘Agree’ to the terms, then securely log into your online banking portal through Xero to authorize the connection. 

 

Are Bank Feeds Safe & Secure?

Yes. 

Firstly, having bank feeds in place ONLY means bank transactions are downloaded into the accounting system. They do NOT give anyone else access to the business bank account. 

 Secondly, XERO has various security measures in place to give you a piece of mind that your financial data is safe and secure: 

 

  • Encrypted Connections: Xero uses advanced encryption technology to secure the data transmission from your bank to Xero. This means your sensitive information is encrypted during transit and cannot be intercepted or read by unauthorized parties. 

 

  • Compliance and Standards: Xero adheres to high standards of data security compliance, thus ensuring that its practices meet or exceed industry security standards and regulations. 

 

  • Regular Renewals: To maintain a high level of security, XERO requires that the bank feed connection is renewed every 90 days. This process is straightforward and helps ensure that the integrity of your financial data is always protected. 

 

people are connected
KIm Marlor the MD of Krystal Clear Accounting
krystal clear accounting

In Summary

In short, having bank feeds really saves businesses time and money on their bookkeeping.  

 They automate and eliminate what is otherwise a time consuming and error prone manual process.  

 Bank feeds is just one of the ways technology can be used to help business owners improve the financial side of their business.

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Krystal Clear Accounting
Ground Floor, Westgate House, 44 Hale Road, Hale, Altrincham, Cheshire,
WA14 2EX

Email: [email protected]
Phone: 0161 410 0020

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