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Employers’ Newsletter - annual events

The work Christmas or summer party is a regular fixture on many employees’ calendars and most staff would be aghast at the suggestion it might be a taxable benefit for them. However, unless you make sure you have met the conditions for the annual event exemption somebody will be paying tax on that party, even if it is not your staff.

So, whether you throw a Christmas party, put on a Summer Ball, or take your staff go-karting each year, these are the conditions you need to meet to benefit from the tax exemption:

  • The primary purpose must be to entertain your staff, not customers or other contacts.
  • The event must be annual, even if you do something different each year. A one-off special event is not covered by the exemption.
  • It must be open to all staff. If you have multiple locations or want to run separate events for each department, all staff must be invited to at least one event. An event cannot be only for directors, unless all your employees are directors.
  • The cost per head must be under £150. All attendees, including non-employees, should be factored into your headcount for this calculation.

There are a few problems commonly encountered with the cost calculations for this exemption:

  • The £150 exemption is a limit, not an allowance. If the cost exceeds £150 then the full amount is taxable.
  • Transport and overnight accommodations costs must be included in the cost.
  • The cost is always calculated as the VAT-inclusive amount, even if the business is VAT-registered.
  • If multiple annual events take place, the £150 limit is applied to the combined cost of all events. If the limit is breached, consider whether any combination of events is under the limit and then tax the full cost of any remaining events.

For instance, if you host three events costing £110, £30 and £60 per head, then the combined cost of the first two would fall under the limit at £140 and only the £60 event would be taxable.

If you would like to discuss the taxation of your annual events, please get in touch.

 

 

Date: 27th March, 2019
Author: David Hadley

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