All employees look forward to their firm’s annual Christmas party. They do not generally expect it to raise tax issues. There is an exemption for costs of up to £150 per head on one annual staff event, and this is often the Christmas party. There was some concern that this year’s switch to virtual parties, and possibly accompanying food deliveries, would not qualify for this exemption.
Happily, HMRC has confirmed that the exemption still applies. The concern was that a virtual event would not meet the definition of an annual event. In addition, many firms are choosing to send employees food and drink to consume during the party, and there was a suspicion that this might be considered a separate gift which would not be covered by the exemption. Few employers would want to celebrate Christmas by telling their employees they faced a tax and national insurance bill of up to £63 for their party.
Several organisations, including RSM, contacted HMRC to clarify the tax treatment of a virtual party, and accompanying food. HMRC has now amended its manual to confirm that a virtual event qualifies for the exemption, and even better that any related food and drink deliveries also fall into the same category. This treatment is subject to the usual conditions:
the event is available to all employees (there may be separate parties for different departments or offices);
a record is taken of attendees, to ensure that those receiving food presents are at the party; and
if costs exceed £150 per head the full cost of the party, not the excess cost, is taxable on the employee.
All employees look forward to their firm’s annual Christmas party. They do not generally expect it to raise tax issues. There is an exemption for costs of up to £150 per head on one annual staff event, and this is often the Christmas party. There was some concern that this year’s switch to virtual parties, and possibly accompanying food deliveries, would not qualify for this exemption.
Happily, HMRC has confirmed that the exemption still applies. The concern was that a virtual event would not meet the definition of an annual event. In addition, many firms are choosing to send employees food and drink to consume during the party, and there was a suspicion that this might be considered a separate gift which would not be covered by the exemption. Few employers would want to celebrate Christmas by telling their employees they faced a tax and national insurance bill of up to £63 for their party.
Several organisations, including RSM, contacted HMRC to clarify the tax treatment of a virtual party, and accompanying food. HMRC has now amended its manual to confirm that a virtual event qualifies for the exemption, and even better that any related food and drink deliveries also fall into the same category. This treatment is subject to the usual conditions:
the event is available to all employees (there may be separate parties for different departments or offices);
a record is taken of attendees, to ensure that those receiving food presents are at the party; and
if costs exceed £150 per head the full cost of the party, not the excess cost, is taxable on the employee.
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