If you’re planning on celebrating the festive period with a staff party, there are a few things you may want to consider other than where, when, and do I have that still have that Christmas jumper from last year?
Whether it is a nice meal followed by a night on the town or a team building adventure day, HMRC is not totalling spoiling the party but has devised some quite stringent legislation regarding social functions and parties. You may want to take note of these so you don’t have to be the Christmas Grinch and tell your employees that their Christmas bash is going to cost them more in tax!
First the good news:
To ensure your employees are exempt from any benefits-in-kind; you will need to adhere to the following rules:
- The event must be annual
- The event must be open to all employees
- The total of all events over the year must cost no more than £150 per head
If your business has more than one location, an annual event that’s open to all of your staff based at one location still counts. You can also put on separate parties for different departments, as long as all your employees can attend one of them.
If you have multiple annual events, as long as the combined cost of events is no more than £150 per head, they’re still exempt.
The ‘per head’ bit is important. It takes into account not only employees but any guests at the event.
Beware:
The £150 is not an allowance to be set against an amount that exceeds that figure. So, if your Christmas party costs £500 per head, you cannot offset the first £150, the full £500 is classed as a benefit.
If any of the events cost less than £150 per head, you may be able to count these costs as exempt. But if you’ve already used up the £150 exemption on another event you’ll have to report and pay the full costs of any additional events that go over this limit (even if they cost less than £150 per head on their own). A good example of this is shown here.
If we’re your accountant and you’d like more information on how you can ensure your festive parties don’t cause your staff to pay more tax, please call 01872 300232 or email us at hello@hivebusiness.co.uk.
