So you’re probably all set for this year’s Christmas work bash? Its worth reminding yourself about the tax rules and how they apply for Christmas office parties.
As you might expect, HM Revenue & Customs aren’t quite as festive as most business owners might like to be in rewarding their team for the hard work put in over the year.
Certain limitations apply for the party to be treated as non-taxable and therefore non reportable (for income tax and National Insurance Contribution purposes) such as:
- it must be an annual event (it could be a Summer BBQ and / or an Xmas party but a celebration party to mark a major contract win, for example, would not fall within this exemption). This is not an exemption for any work event;
- the Christmas party must be open to all staff – not just selected employees e.g. directors. Although separate departments or offices are entitled to have their own parties within these limits;
- a limit of £150 per head applies – this is not per employee so the total cost is divided between the number of attendees (which might include non-employees e.g. spouses);
- the £150 limit includes VAT and other incidental costs such as transport, hotels, DJ, speakers etc. Aka the whole shebang!
Christmas gifts to staff are not included in the above exemption. HMRC generally don’t like them but in practise are generally prepared to turn a blind eye to trivial benefits such as a bottle of wine, a turkey or bunch of flowers. Anything more substantial (e.g. hampers, cases of wine etc) and you could be landing your employees with an unexpected tax bill. You have been warned.
Ho ho ho! Merry Christmas!