During a recent interview with the Telegraph, a source from HMRC stated that employees of the organisation will not be having a Christmas party, although other businesses are permitted to spend up to £150 per head on a festive celebration.
Corporate events, including Christmas get-togethers, are not taxed as long as the total cost per employee doesn’t exceed £150. If it falls just a few pennies over this amount, tax will have to be paid on the whole cost.
The source from HMRC confirmed that none of the £3.4 billion budget will go towards celebrations.
The annual tax perk applies to other corporate functions in addition to the annual Christmas party, although there are strict rules to adhere to.
What are the criteria for employers when deciding what to report and pay?
Employers need to report employee benefits to HMRC, although this depends on the following criteria:
• Whether the event is annual
• Whether all employees are eligible to attend
• If the cost exceeds £150 per person
• How many events are held during a tax year
• How much an employee earns and whether they are a director of the company
What are the exemptions to regular reporting rules?
If the event or party is held once a year – like a Christmas celebration or a summer event, perhaps a barbecue – and it costs less than £150 per person, while being available to all employees, it will be exempt from normal reporting rules and tax and National Insurance won’t be charged.
If the events are held at various departments within the company, they will still be exempt, as long as all your staff can attend at least one. If you hold more than one throughout the year and the total cost per employee is less than £150, the events will be exempt. If you have any employees who earn less than £8,500 a year, don’t worry about reporting or paying tax for them – as long as they’re not directors of the company.
What are the reporting obligations?
All events that aren’t classed as being exempt will have to be reported to HMRC, and you will be liable to pay National Insurance on them. Once the exemption has been used up during a tax year, any further parties or events have to be reported to HMRC.
Let us know what you think about the tax-free amount for parties; should the figure be more than this, or should tax be paid on all company parties and events? Maybe your opinion differs depending on industry or sector.
If you’re a business owner and need advice in this area, drop us a line!
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