Provision of a Christmas party is a non-taxable benefit for employees so long as the total cost of the function is no more than £150 per head.
If the cost exceeds £150 the whole cost is taxable, not just the excess above £150. Where there is more than one annual event, there is no taxable benefit if the events cost less than £150 in total. However if, for example, there are two events which cost £100 and £60 only one of the events would be exempt. The events must also be available to all employees.
The £150 cap includes accommodation and transport home, as well as food and drink. Also, as long as the cost per head is kept under the limit, employees can bring their partners along too.
Gifts to employees
For those who are truly entering the festive spirit, this year there is a new trivial benefits exemption. Before 6 April 2016, gifts to employees were taxable but post 6 April 2016, so long as they cost less than £50, the gifts may be deemed trivial. This means that the gift doesn’t not have to be declared on the employee’s P11D form and is free from tax. So for the first time employers can give their employees a Christmas hamper without having to worry that the tax man might come calling.
The exemption won’t cover gifts where:
- The cost of providing the benefit exceeds £50
- The benefit is cash or a cash voucher
- The employee is entitled to the benefit as part of a contractual obligation (including under salary sacrifice arrangements)
- The benefit is provided in recognition of particular services performed by the employee as part of their employment duties.
It is important not to forget that cash gifts, such as a Christmas bonus of vouchers redeemable for cash, also have to have tax and National Insurance contributions paid through the PAYE system.
Therefore it is worth reminding your employer that there’s no need to be a scrooge this Christmas!!
If you would like to discuss any issue arising from this article contact Anne Rose, Head of Tax on 0845 177 5500 or use our on-line contact form.