BLOG: Introducing the virtual Christmas party tax exemption

Rosy Hughes

By Rosy Hughes, Head of Private Client Tax

It’s that time of the year where the office chatter would usually be surrounding the imminent Christmas office party and the chance for staff to enjoy an evening out celebrating together.

However Covid-19 has put a stop to the traditional annual office party and as with everything else this year, the celebrations at many companies are set to go virtual – facilitated by everyone’s new best friends Zoom and Teams.

HMRC has confirmed that virtual events will now be included in the exemption, where all the conditions which are normally met for physical celebrations are met.

This is an extension of the exemption which allows employers to host an annual event, which is made available to all employees and at a cost of less than £150 per head.

The cost covers entertainment, food and drink, VAT, transport and accommodation – but it’s important to remember that if you exceed the £150 the whole amount is taxable!

Where these conditions are met, the employer will not be required to report anything to HMRC, or to pay any tax and National Insurance.

I’ll leave it to you to come up with creative and innovative ideas for your virtual Christmas parties, and I’m sure with the creativity we have seen in business this year there will be some great ideas.

Perhaps you could book online activities for staff, organise live performances to be streamed into homes, quizzes or send out a party kit to staff at home.

Businesses can of course still utilise the statutory trivial benefits exemption to reward staff. Keep in mind that the cost must be less than £50, can’t be cash or cash vouchers and shouldn’t be viewed as a performance reward!

You don’t have to report these one-off, low-cost benefits to HMRC and it’s a great way to reward staff.

And there is always the traditional Christmas bonus to revert to if needs be! The smallest of bonuses can inspire cheer in the festive season and is a really simple way to thank your employees for their work in what has been a difficult year for us all.

The bonus will be subject to Income Tax and National Insurance, but the impact of this will depend on the individual circumstances of the employee.

While we might not be able to celebrate in the ways we would usually this Christmas, there are still plenty of avenues to reward staff and give them that much needed festive boost this year.

Merry Christmas from everyone at Burgis & Bullock.

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