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Gift vouchers, a Christmas hamper, or a team outing for your staff can remain tax-free, but the tax authorities set limits through the Work Expenses Scheme (WKR). If you stay within the tax-free allowance and the targeted exemptions, you will avoid an additional assessment.
The work-related expenses scheme in brief
Under the Work Expenses Scheme, you can provide your employees with tax-free allowances and benefits, such as a Christmas hamper or a staff party. A tax-free allowance applies: a percentage of your total payroll that you may spend tax-free. If you exceed this amount, you will pay a final levy on the excess.
Targeted exemptions and nil valuations
In addition to the tax-free allowance, there are targeted exemptions (for example, for certain study costs or travel expenses) and zero valuations for workplace facilities. These do not reduce your tax-free allowance, provided you meet the conditions. (The percentages and conditions change periodically; coordinate this with your payroll department.)
It must not be disguised wages
The tax authorities ensure that you do not replace taxable salary with tax-free perks. A perk must be customary; excessive or unusual benefits can still be taxed as wages (the customary practice test). So keep it reasonable and businesslike.
Document it properly
Keep records of what you subject to the WKR and monitor your available allowance. A clear regulation, for example in your employee handbook, prevents surprises during an audit.
Frequently Asked Questions
Can I give a Christmas hamper tax-free?
Often yes, within the tax-free allowance of the work-related expenses scheme. If you exceed this, a final levy will follow.
What is the customary practice test?
The requirement that a benefit is not unusually high or unusual. Excessive perks can still be taxed as wages.
How big is the free space?
A percentage of the total payroll that may change periodically. Coordinate the current percentages with your payroll administration.
Want to arrange your employment terms properly?
Our legal experts incorporate regulations into your employee handbook. View our employment lawteam or schedule a free consultation.
