Christmas party tax breaks
With news from the CIPD that 77% of private sector organisations are planning to throw a Christmas party, perhaps not everything is doom and gloom at the moment. HMRC’s guidelines on Christmas parties could bring further cheer to businesses with tax concessions on annual celebrations.
HMRC states that where an annual Christmas party or alternative annual function of a similar nature, such as an annual dinner dance is open to the staff generally, the HM Revenue & Customs will not seek tax on the relevant benefit arising to each employee where it does not exceed the allowable amount. In this context Tax Offices will treat expenditure of up to £150 per head per annum as tax free. "£150 per head" means the total cost of the function, including VAT and any transport or accommodation provided by employer, divided by the number of people attending.
Should the cost rise to more than £150 per head, HMRC shall claim the full amount of tax for the benefit divided among the relevant employees.
The concession applies to Christmas parties or other annual functions and what the HMRC charmingly calls “dinner dances”, but only if the function is open to staff. If, for example, you were to hold a Christmas party solely for directors, tax would be levied on the benefit, regardless of the cost per head.
You can claim the concession on more than one party – but providing that the total cost per head of all parties does not come to more than £150. If that is the case, then each function will be looked at and the most beneficial function with a cost per head of less than £150 will be exempt.