Christmas is just around the corner, and for retailers, this time of year is when the tills really start ringing, but as a service business, you might find that things are starting to slow down.
It’s around this time that spending is unavoidable on Christmas parties, secret Santa gifts and employee bonuses.
Here are our top 6 small business accounting tips to help you see through the slow financial months.
- Planning a Christmas party?
No event fills us with such a mix of ideas and dread about the costs. One thing you don’t need to dread is the tax headache – in theory. Whilst getting your team together to reward and recognise their hard work during the year, there are some Terms & Conditions. HMRC states that the Christmas party must include all employees, and you can only spend a maximum of £150 per head inclusive of VAT. If the cost of the party exceeds £150 per person then unfortunately all the costs are taxable on the employee as a benefit in kind.
- Know your cash flow
You can’t start planning a team night out if you don’t have an idea of what’s coming in and out. There’s no point looking back and thinking ‘oops, we didn’t bill enough last month’. Cloud accounting software such as Xero gives you an instant snapshot of your incomings and outgoings.
- Christmas bonuses
As an employer providing Christmas bonuses to your employees, you have certain tax, National Insurance and reporting obligations. This depends on: a) whether you give cash bonuses or gifts to an employee and b) if you give goods to an employee, whether or not they can be resold for cash. You must report any Christmas bonuses to HMRC, and deduct and pay tax and National Insurance on them.
- Chase late payments
Now is the time to give your debtors a festive nudge. Consider making contact a few days before the due date to ensure they have received your invoice and are ready to process the payment. If you find you’re too busy getting projects wrapped up before the year end, consider outsourcing this job. Ensure you’re managing your own creditors, you don’t want to end up with late payment charges or damage business relationships.
- Gifts to employees
Cash gifts and vouchers are not tax deductible. HMRC has conceded seasonal gifts such as a turkey, a box of chocolates or a bottle of wine to be exempt. However, a case of wine, a bottle of fine wine or a hamper is unlikely to be considered trivial.
- Business gifts to customers
Gifts to customers are only allowable as a tax deduction if the total cost to one individual per year is less than £50, the gift bears a conspicuous advert for the business and it isn’t food, drink tobacco or exchangeable vouchers.
With a little forward planning, your holiday season can be a financial success and see you start the New Year with the right foot forward.
For more information and helpful tips for what you can and can’t do this Christmas, please contact us on 01785 243476 or email firstname.lastname@example.org