Benefit in kind and entertaining tax rules can often get in the way of people having a great time but one exemption allows an employer to throw a Christmas Party for their employees without it being treated as a taxable benefit … but only if the cost per head is no more than £150. The £150 limit is an annual one for such events so if there are other events in the year then the aggregate cost of these is the relevant figure to consider.
To qualify the party must be open to all employees – though different events in separate locations are allowed if they are open to all employees in those locations.
It is worth remembering that if the event costs more than £150 then the whole of the cost (not just the excess) is liable to national insurance and income tax for both the employer and employee. In this situation, the cost of the party would be included as a benefit in kind on the P11d. There are potentially harsh penalties for getting this wrong so it is worth taking some care here.
The cost of £150 per head is based on the total costs of the party divided by the number of attendees. Attendees may include the partners and guests of employees and they have a £150 allowance too.
It is therefore recommended that you keep clear records of who attended the party and all of the costs which will include the incidental costs such as transport to and from the party and overnight accommodation if these are provided. Should HMRC decide to investigate you will need to provide this level of detail to answer their questions.
A really generous employer may also take advantage of another exemption that allows the provision of a gift up to the value of £50 per employee. This is only available to employees and it must not be a reward for their services.
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