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Hidden cost of a Christmas party

Just a quick reminder that Christmas parties for staff are tax-free only if the employer’s annual cost of all such events is no more than to £150 per staff member.

The £150 limit applies to any annual party or similar function within a tax year, so if the employer puts on a summer party and a Christmas dinner together costing less than £150 a head, both will be tax-free for employees. The good news is that the £150 limit goes beyond food and drink, it could also include accommodation and transport home as well as the inclusion of an employee’s partner as long as the cost per head stays under the limit.  On top of this, the employer will also get tax relief on the total costs.

The bad news is that if the cost per head does exceed £150 then the total cost, not just the excess over £150, is taxable.  Employers can choose to cover the tax and national insurance costs which the employee would otherwise have to pay but this has to be grossed up.

 

 

Date: 3rd December, 2013
Author: Cathy Corns

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