Most organisations have, or plan to have, an annual Christmas party for staff. Did you know that the tax rules also allow staff parties at other times of the year which are a tax-free benefit if certain conditions are satisfied?
Show your appreciation
It is good to show your appreciation and to thank your staff for their efforts, and it can improve morale. However, you need to take care to do this in the most tax efficient way. If you go about it in the right way you can give tax free benefits to your staff and obtain tax relief for yourself.
How the tax free benefit works
The exemption applies to an annual party (for example, a Christmas party), or similar annual function (e.g. summer barbecue), provided for employees, and is available to all employees or all employees at that location (if you have more than one location).
If the employer provides two or more annual parties or functions, no tax charge arises in respect of the party, or parties, for which cost(s) per head do not exceed £150 in aggregate. For each function the cost per head should be calculated. The cost per head of subsequent functions should be added. If the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt, the other is taxable.
As an employer providing social functions and parties for your employees, you have certain National Insurance and reporting obligations.
If you have any questions about this please feel free to contact us. Alan Patient specialise in helping companies, and schools, to improve what they get out of their business and help you achieve your business dreams.