Tax exemption of Christmas parties/gifts

11th December 2021

Businesses may be hoping they can hold their annual Christmas parties this month. Providing the event is annual, open to all employees and the total cost, including VAT, is less than £150 per person (including non employee guest attendees), this will be a non-taxable benefit in kind (ie free of PAYE tax and National Insurance contributions). Be careful not to exceed this, otherwise the whole amount is taxable, not just the excess. It is also important to note the £150 is for the whole year, not per event.

 

Where it is not possible to hold one function, for example for different departments or offices, this will still be exempt as long as all employees can attend one of them. HMRC have confirmed virtual functions using IT will also be exempt as long as all the criteria are met.

 

Festive gifts can also be tax free if the cost is less than £50 per head, as these are considered “Trivial Benefits”. Gifts such as non-cash vouchers, wine or chocolates can all be given as long as it is not a reward for service. Benefits provided to directors of smaller companies are capped at £300 per year.

 

As always, your usual Whitings contact can help if you want further information.

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