With traditional staff Christmas parties off the cards this year, some employers are considering the options available for a virtual alternative. However, if you are looking into ways to hold a remote 'do', it is worth considering that this may make the usual tax benefits a little more complicated.
HMRC allow limited tax relief against the cost of holding an ‘annual event’ for employees, which means no tax or national insurance contributions are payable on costs relating to annual social events organised for employees – providing certain conditions are met:
There’s a limit of £150 per attendee each year and if this limit is breached, the employer must cover the tax and NIC for all of the costs, not just the amount above the limit. The exemption considers all end-to-end costs for the event including VAT.
For an event to be eligible for the exemption, it must be open to all employees to attend, or, alternatively, if there are several events (by location or office), all employees should be able to attend one.
In theory, the same tax exemptions as a normal Christmas party would apply (the provision of food, drink, entertainment, etc would be allowable up to the cost of £150 per head). In practice, it is a little more complicated. Structuring a virtual party so that it incorporates elements of a traditional party would help towards meeting the exemption requirements, however the suggestion that HMRC may require proof of attendance could be an issue.
If you are planning a virtual event, it would be wise not to take the tax exemption as an absolute certainty (i.e. don’t be disappointed if it's not possible to claim).
An alternative/additional way to spread a bit of festive cheer amongst your team this year might be a Christmas gift...
Gifts, up to the value of £50 (as long as they aren’t cash or a cash voucher), are covered by the trivial benefits exemption.
Please get in touch if you have any questions relating to this.