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Christmas is the time of giving – but what are the tax implications of holding a staff party?

25 November 2013 •

Providing your staff party is open to all your employees, HMRC allows an exemption from tax for those who attend; here is an outline of the rules that apply:

·         There is a £150 (average cost per person) per tax year limit

·         The average cost per person must include the VAT and any accommodation and/or transport provided.

·         £150 is not an allowance but the threshold for exemption; if the cost is £151, the whole benefit is taxable.

Are you allowed more than one party per tax year?

You can offer staff more than one party per tax year providing the combined total does not exceed £150; for example you could have a low cost summer party at £40 per head and then a Christmas party at £100 per head.

If you have two functions, at say £100 and the other at £75 per head, you can choose which party to make exempt.  If you opt to make the £100 function exempt, then the £75 function is taxable in full which means that if an employee only attended the £75 function, they would be taxed on the £75 benefit in full. If the employee attended both functions, they would still only be taxed on the £75. Obviously, if an employee does not attend either function or just the one with a cost of £100, no taxable benefit would arise.

In practice employers will often settle any tax due on behalf of employees. If you are in any way uncertain how to apply these rules please do not hesitate to contact us on 020 77316163 or email info@warrenerstewart.com

 

“Warrener Stewart understands our business; they give us more than any other Accountancy service we have ever received in the past. They are extremely commercially aware and very current when it comes to changes in tax policy. ”
Diana Hoare - Anderson Hoare