Current rules allow employers to spend up to £150 per head (including VAT) towards the costs of an annual function such as a Christmas party without creating a tax liability for their employees and the employer – provided that certain conditions are met. The limit is £150 per attendee and if this limit is breached, the employer must cover the tax and NIC for all of the costs, not just the breach. The exemption considers all end-to-end costs for the event including VAT.
Remember that certain gifts to staff at Christmas are also tax free if structured correctly. Employers are allowed to provide their directors and employees with certain “trivial” benefits in kind tax free.
On 20 November, HMRC confirmed that they will accept a virtual Christmas party as an event which is capable of falling within the rules for annual functions. HMRC have supplied the following statement:
“Having considered the scope of section 264 ITEPA03 (annual parties exemption), we are pleased to confirm that the exemption will apply to the costs associated with virtual parties in the same way that it would for traditionally held, parties. Therefore, the cost of providing food, entertainment, equipment and other expenses which may be incurred in hosting a virtual event, will be exempt, subject to the normal conditions of the exemption being met. It is important to note that the intention of the exemption is to allow for costs of provision which are generally incurred for the purposes of the event itself, and that the event, along with any associated provision, is available to employees generally. We will be updating our GOV.UK guidance shortly.”
Please feel free to contact us if you are considering taking advantage of these exemptions. Our tax specialists at Integritax Accountants are available to ensure you are as tax efficient as possible, and to assist you in keeping the necessary records to satisfy HMRC.
For more information, please contact us on 0121 663 1890 or email support@integritax.co.uk
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