Is Santa sleighed by tax?
It’s Christmas Eve, which means that - in the words of the classic Christmas song - “Santa Claus is coming to town”.
But even as good old St Nicholas gets ready to harness Rudolph and all the rest of the reindeer for his annual midnight ride, are there any tax issues that he will have to think of?
Mileage for the sleigh
When you’re travelling on business in your own vehicle, you can usually claim tax relief on the cost of that travel, at HMRC’s approved rates.
But those rates only apply to cars and vans, motorcycles, or bicycles, and HMRC specifically excludes any other kind of vehicle, such as a horse-drawn cart or reindeer-drawn sleigh, from the rules about claiming business mileage.
So if Santa Claus wants to try and claim his mileage, he should probably use the rate for a bicycle because it is the nearest equivalent - a vehicle propelled by a human rather than by fuel - and be prepared to discuss this with a HMRC inspector.
Food and shelter for the reindeer
The reindeer who pull the sleigh are very definitely working animals rather than pet animals, so the cost of buying them would go into Santa’s accounts as assets. This would also mean that their food, drink, shelter and any vets’ fees would be tax-deductible.
The reindeer aren’t being kept for what they produce, either for their meat, skins or as a breeding herd. They’re kept to do a job of work and their work is pulling the sleigh. So the question of whether they should go into Santa’s books as stock or assets doesn’t arise - as working rather than potentially production animals, they are definitely assets.
Wages for the elves
Santa Claus would be lost without all those elves making the toys he delivers! So he must make sure that he pays them the minimum wage at least, and ensure that he also files all the relevant forms with HMRC.
This Christmas is also the last that he won’t have to think about filing his payroll forms in real time - as from April 1st HMRC is changing the rules so employers will be legally required to report PAYE in this way. Let’s hope there’s a good Internet connection at the North Pole - and yes, Santa would be able to claim the cost of that when he uses it for business!
Would he register for VAT?
Santa Claus is not making sales, he’s giving gifts! So he would never have to register for VAT because he doesn’t actually earn any money.
But as he would need to buy materials to make the gifts, it might be beneficial for him to register voluntarily for VAT so that he can reclaim the VAT he pays on the materials.
If he did register, he wouldn’t then have to charge VAT on the presents he brings, so long as they cost under £50 per person in a 12-month period. Santa Claus only gives his gifts once a year, so the second condition is fulfilled - but he’d need to prepare his accounts carefully and make sure he isn’t giving gifts worth more than £50 to any one child if he wants to avoid charging VAT on them!
What about the mince pies?
Lots of families have a tradition to leave out a mince pie for Santa and a carrot for Rudolph. Would these be a taxable benefit?
Santa would actually have to be an employee of all the families he delivers to for this to affect him, but if he were, then yes, these would be a taxable benefit and the families would have to pay National Insurance on the value of the mince pie and carrot.
But, with all this a very important query arises, which is whether Santa Claus is actually in business and trading at all!
He’s never going to make a profit, because he doesn’t take money for the gifts he delivers. After all, nobody pays him. He will always make a loss, because he has to feed and shelter the reindeer, pay the elves, buy materials to make the toys... but he will never earn anything. If he’s lucky, HMRC will look upon him as a very kind philanthropist but not a businessman, and he won’t be subject to tax rules.
- Commercial savvy: what small businesses can learn from this year’s Christmas ads
- Staying on top when you’re under the weather: tips for small business owners
- Five things we’ve learned about UK micro-businesses in 2017
- Customer stories - Village by Village
- Autumn Budget 2017: business as usual for small businesses