It was Christmas Day in the workhouse
The happiest day of the year
The men’s hearts were full of gladness
And their bellies full of beer
Well , they might have been, but if the Christmas party cost more than £150 per head there is a tax implication. In fact, current tax legislation says something like this: As an employer you can throw parties to the value of £150 per employee per annum.
This means if you threw a summer barbeque that cost £100 per head, you only have £50 per head left to spend on seasonal fun… at least that is tax deductible.
Along came the workhouse master
Through his dank and dreary halls
He wished his men Merry Christmas
But all he got was… very little thanks!
That’s probably because he wanted to give his employees a £1,000 each in cash. The problem was all his workers were high rate tax payers so £1,000 actually related to something less than £600 when you take into consideration 40% tax and National Insurance.
Up jumped a jolly old worker
His face as bold as brass
‘We don’t want your Christmas bonus
You can shove it up your… tax return!’
There are some alternatives to cash. The old favourite is vouchers but there are still issues. A voucher is classed as a Benefit in Kind and tax will be deducted at 40% for the work house master’s staff when P11Ds are submitted after the end of the tax year.
This vexed the work house master
And he cried to all his Gods
I won’t pay you a Christmas bonus
You rotten bunch of… ungrateful people
But then he had an idea. Instead of paying cash or vouchers, he gave his team the option of a £1,000 to their pension fund. For those of them who had a private pension the provider supplies a form to allow the contribution to be made and there’s no tax implication for employer or employee… in most circumstances.
But then, thought the work house master, how motivational is a pension contribution at Christmas and what about those employees who haven’t got a pension?
What a quandary! Sometimes it’s so hard to know what to do to motivate the team.