We don't want to put a damper on all the seasonal festivities. Still, we thought it would be useful to clarify tax obligations for employers and employees if a work Christmas party is organised and paid for by the business.
This also applies to other social events during the year, if these are organised by and paid for by the company.
If an employer organises a Christmas party and pays for the employees, then this is classed as a benefit in kind. In these cases, the employees would be taxed. In these situations, you should let your employees know beforehand.
However, there are some exemptions to this rule which may be worth considering.
- If the party (or event) organised for the staff is below £150 per person, then it would be exempt from tax.
- Plus, it is essential that the party is available to ALL staff and is not exclusive to just a few. For example, for Directors only, the party would not be exempt from tax.
If an employer decides to organise more than one social event for employees in the year, then to remain exempt from tax, the total cost of the events must not exceed £150 per person.
It is important to note that when calculating the cost per head, you need to take into account the total number of people which includes your employees' partners and any clients that attend. Plus, all costs from venue hire, food through to any overnight stays must be taken into consideration.
HMRC are very strict on these rules, and if inaccurate or incomplete information is submitted, they can investigate and pose harsh penalties.
We have covered just a few key points in this article. If you want to understand more about the tax implications of organising a staff Christmas party or other events during the year, please do contact us for advice.
You can call 01623 490 120 or email