Christmas party - Holden Associates
Benefits in kind, Employee, Entrepreneur, Limited Company, Owner Managed Business, Payroll, Small Business
Christmas partyJason Holden18th November 2020 13th November 2020
Virtually time for the office Christmas party
Despite the crazy and uncertain times that we find ourselves living in, directors and employees can still celebrate Christmas in tax-free style – even it does have to be in the form of a ‘virtual’ office Christmas party.
Although there is no specific allowance for a Christmas party, or any other employer-provided social function, HMRC do allow limited tax relief against the cost of holding an ‘annual event’ for employees, providing certain conditions are met.
the total cost must not exceed £150 per head, per year
the event must be primarily for entertaining staff
the event must be open to employees generally, or to those at a particular location, if the employer has numerous branches or departments
The exemption should therefore apply if, say, an employer meets the cost of meals delivered to each employee’s home and the staff ‘party’ is held virtually via video conferencing or similar.
any transport or accommodation incidentally provided for persons attending it (whether or not they are the employer’s employees),
The £150 exemption is mirrored for Class 1 NIC purposes, (so that if the limit is not exceeded, no liability arises for the employees), but Class 1B NICs at the current rate of 13.8%, will be payable by the employer on benefits-in-kind which are subject to a PSA.
The cost of staff events is generally tax deductible for the business. Specifically, the legislation includes a let-out clause, which means that entertaining staff is not treated for tax in the same way as customer entertaining. The expenses will be shown separately in the business accounts – usually as ‘staff welfare’ costs or similar.
In recent months radical measures have been put in place by governments across the world to try and control the spread of coronavirus, and almost all businesses and their employees will have been affected in some way. The staff Christmas party will probably look quite different this year, but with a tweak here and there to meet with current restrictions, it should still be possible for employers to provide some festive cheer.
Are employee parties tax-free?Jason Holden9th December 2021 9th December 2021
9th December 2021 9th December 2021 |BY Jason HoldenAre employee parties tax-free?
Not sure if your annual staff function is tax-deductible? Come and talk to us. We’ll...