Work’s Christmas Party: Beware Tax

Businesses and their staff will have already had, or will be looking forward to their annual company Christmas parties in the next few weeks. Providing all of the following criteria are met, the annual event is free of PAYE tax and National Insurance contributions (NIC) for the employee, and is treated as a non-taxable benefit in kind:

The party or similar social function must:

• Be open to all employees
• Be annual (such as a Christmas party or summer BBQ)
• Cost £150 or less per person (including non-employee guest attendees and including VAT)

Keep in mind!

Multiple annual events across the year are permitted too, as long as the combined cost of the events is no more than £150 per head per year. This criteria also applies to online or virtual parties. You should be careful not to exceed the £150 per head limit, otherwise the whole amount will become taxable on the employee, not just the excess. In this case, you may be able to set up a PAYE settlement agreement (PSA) with HMRC which allows the employer to remove the tax burden on the employee by settling the tax on certain benefits on the employee’s behalf.

Other festive gifts to employees (such as a Christmas hamper) can also be tax and NI free, if treated as trivial benefits, providing the gift meets the following criteria:

• It cost you £50 or less to provide
• It isn’t cash or a cash voucher
• It isn’t a reward for the employee’s work or performance
• It isn’t in the employee’s terms of contract

Trivial benefits for directors are capped at £300 per year. There is no cap on employee trivial benefits.

Get In Touch

For more information or advice on the tax treatments of Company Christmas parties, contact your local Whitings LLP office today.

Disclaimer - All information in this post was correct at time of writing.