Annual Events

It’s coming to that time of year again where many employers celebrate the work of their employees with a Christmas party. But if this is the second annual event of the year, is this taxable?

At this time of year, most employers will be making preparations for their Christmas parties. This may be one of a few annual parties they may host throughout the year. If an event is held for all employees and costs less than £150 per head, then there may be a tax exemption available.

However, one thing to watch out for is, the £150 is a fixed amount for the whole tax year and can be spread over several events. So, if an employer hosted a summer barbeque at the cost of £50 per person and a Christmas party costing £100 per person, both events would be tax free if all employees were invited. This figure of £150 is not an allowance but an exemption, meaning that once this amount is exceeded, the full cost of the event is taxable.

Using the same example, if the employer decided everyone could have a Christmas pudding with their turkey dinner this year, and the cost per head went up to £110 per person, the combined cost of the two events would now exceed £150 per head. Therefore, the employer would treat the lower of the two events as taxable i.e. the summer party.

Sadly, it’s not always possible to fit all employees around one table as some employers have multiple locations and departments. However, in these circumstances, HMRC accepts that they may wish to have separate parties. So, no matter where the employees tuck into their Christmas dinner this year, the exemption may still apply.

If you need any help with employment tax matters, either for the Christmas past, present or the future, please get in touch with us at employmenttaxesteam@unw.co.uk.