How an annual event for employees can cost less than you imagine.
The annual Christmas Party is something that employers often avoid, mainly due to high costs. However, many employers are not aware of how to use the tax laws relating to annual events to their advantage.
Employers would not have to pay tax from costs relating to providing an annual event, such as a Christmas Party, as long as the event adheres to the following simple rules:
- It has to be an “annual” event. (An “annual” event can happen at any time of year, but must happen every year at the same time. A Summer barbeque, or a Valentines Ball also qualifies as an “annual” event.)
- It must be available to ALL employees.
- It must cost less than £150 per head.
When calculating the overall cost per head, don’t forget to also take into account the cost of venue hire, entertainment, food and drinks, along with any transport or accommodation costs. Anything that you pay out for relating to the event must be included in your calculations.
To ensure the same limit of £150 applies to everyone, HMRC say you should divide the total cost by the number of people attending, rather than itemising the expenditure on each individual. This way you can see whether the average cost per employee falls under £150, and to ensure that those who incur extra expenses, like travel and accommodation, are not excluded.
The limit of £150 per head is a “per year” amount, meaning that you are able to hold as many “Annual Events” as you like as long as the total per year is less than £150. So if you haven’t had any annual events this year, why not use your full allowance in one go and make this Christmas party spectacular!
Gifts.
At this time of year, the HMRC rules applying to gifts from employers to employees are also worth making note of.
Gifts given to employees, providing it is a “trivial” gift, will also not be taxed. A “trivial” gift may be a Christmas turkey, a bottle of wine, or box of chocolates. As with the laws relating to Annual Events, the “Trivial” gift must be given to ALL employees, not just a select few. For a gift to qualify as “trivial”, it cannot have a cash value, like gift vouchers.
If a gift is deemed taxable by HMRC, the employer could agree a PAYE Settlement Agreement (PSA) whereby the employer agrees to pay grossed-up income tax on behalf of the employee.
PAYEpeople – ‘Helping employers reduce their PAYE tax obligations’
