The sun may be shining and the temperature heading in the right direction – but many businesses are already turning their attention to booking the annual Christmas ‘do’. And it pays to know the party rules.
Most employers are aware that they can throw a staff party for their workers at a cost of up to £150 per head without this being treated as a taxable benefit, but there are conditions to watch out for.
And they are worth noting, not just for Christmas, but for events you may be thinking of having at other times of the year. After all it is barbecue season!
The exemption can apply to any type of party, provided the event is held annually. A one-off event, such as a 25th anniversary party, does not qualify.
Another requirement is that the party is open to staff generally, although it is possible to have an event for employees at one location or put on separate parties for different departments.
A function should not just be for directors, unless of course there are no other employees.
The £150 per head is not an allowance, so the entire benefit is taxable if the per head cost just exceeds £150 by a pound or two.
Along with expenditure on room hire, food, entertainment and prizes, cost includes VAT and any transport or overnight accommodation provided. Two or more annual parties can be exempt as long as the £150 limit is not exceeded.
It may be impossible to establish the exact number attending a large function, but an estimate is permitted based on the number budgeted for or booked.
Alternatively, smaller occasions, such as celebrating employee birthdays, may be funded tax free by making use of the £50 trivial benefit exemption. This may allow a party to be thrown if the “per head cost” does not exceed £50.
There is quite a bit more flexibility here as the function does not need to be open to all employees or held annually.
However, there are other conditions such as the occasion must not be provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services) and the employee must not be entitled to the benefit as part of any contractual obligation.
To discuss this article or any tax matters please contact me on 01772 430000.