It’s that time of year again, the festive season is upon us, and the Christmas parties are about to get into full swing!
For further clarification, we have put together a brief guide.
The “Annual Party”
Although most businesses utilise their £150 per employee exemption on the Christmas party, the exemption can be utilised for any annual event (a summer barbecue for example).
HMRC allow exemption from tax, NICs and reporting if you provide a party or similar function for employees, if it meets all three of the following conditions:
· it’s an annual event, such as a Christmas party or summer barbeque
· the event is open to all your employees
· the cost per head of the event isn’t more than £150
Two or more functions
You can have more than one “event” if the combined cost of the events does not exceed £150 per head. So, if you had a “summer barbecue” at a cost of £75 per head and then a “Christmas Party” that cost £100 per head, the Christmas party would not qualify for exemption as it would take the total cost per head to over the £150 threshold. However, if the two events cost £65 per head, you would be entitled to claim the full amount as the total would be below the £150 threshold.
If the event costs more than £150 per head it will not be eligible for the exemption.
Exemption, not allowance
The £150 isn’t an allowance that can be offset against more expensive events. If your event(s) cost £200 per employee, you would not be able to offset the £150 against it and it would therefore not be eligible for exemption. The exemption can only be claimed once per tax year up to the maximum value.
You can also claim the £150 for any spouses/partners that attend as guests. If you had a Christmas party with just you and your partner would qualify for £300 of tax-free partying!
It is important to note that the cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided.
To ensure that your party qualifies for exemption make sure you do not fall into any of the following categories;
· the event costs more than £150 per head
· an event costing less than £150 per head but you have already “used up” the £150 threshold on other events
· any event that isn’t annual – e.g. a party to mark the winning of a major contract
This is a new benefit this year and means that your company can give several gifts to you as a director of the company (and other employees if relevant) to a total value of £300 a year.
Each gift must be £50 or less and the reason behind the gift must not be work related (i.e. Christmas bonus, birthday etc.)
A gift cannot be cash or convertible into cash but can be gift cards and other items, or an event/meal.