The summer holidays are nearly over! That means (dare we mention it?!) time to book your Christmas Party!
Sadly, HMRC views staff parties as a chargeable benefit, meaning they need to be declared on a P11D for each employee, and you need to pay national insurance on the value.
Make the most of the exemptions available for your parties
However the good news is that there are exemptions. In order to make the most of them, here’s what you need to know.
The cost of annual events such as Christmas parties, summer BBQs and annual days out are exempt. However you must meet all of the following conditions:
- The event is an ‘annual’ event. It can’t be a one-off event, such as a retirement party, or a team building event.
- It must be open to all employees. It’s okay to have more than one event, such as a Christmas party for your Exeter branch and a separate party for your Taunton branch, or one for your office staff and site-based staff. Remember, you must invite everyone.
- The cost per head must be less than £150 (including VAT). That’s the total cost of the event(s) including food, travel, accommodation etc, divided by the total number of (planned) attendees. If someone cancels at the last minute because they are unwell, they are still included in the number of attendees. The number of attendees includes the employees who said they’d attend, together with any guests such as partners, children, sub-contractors.
- Multiple events can be covered, so, for example, you could spend £90 per head on your Christmas party and £47 per head on a summer party. If you spend £140 on your Christmas party, and £47 on your summer BBQ, you can only cover your Christmas Party with this exemption, but your BBQ may be exempt as a ‘trivial benefit’ under £50 (see https://www.gov.uk/expenses-and-benefits-trivial-benefits). It’s a limit not an allowance, so if the cost is £151 per head the whole £151 would be taxable – not just £1 per head. The whole cost is still an allowable, tax deductible expense for your business.
Need further help or advice?
Check out https://www.gov.uk/expenses-benefits-social-functions-parties/ for further information.
Let us know what your party plans are this year, and we’ll help you check whether the exemptions apply.