HMRC has given the go-ahead for tax-free virtual Christmas parties. It would appear the taxman isn’t scrooge and is in fact ready to spread some festive cheer!
No one would have ever imagined that we’d currently be researching Christmas Party ideas to take online but following the government’s latest announcement it appears to be the only way.
The Government’s latest announcement has certainly put a halt on nearly all physical Christmas Party plans any of us may have had or been hoping for. The good news is that HMRC has updated its guidance in relation to section 264 of ITEPA 2003 (annual parties exemption).
As an employer providing social functions and parties for your employees, you have certain National Insurance and reporting obligations however there are certain taxable expenses you can benefit from if you meet the criteria.
HMRC deems Christmas parties, in some instances a taxable expense. This is only the case however if the cost is £150 per head or less. If the cost is above the £150 per head then none of the cost is allowable.
Most companies will use these rules for their annual Christmas party although it can be used towards any annual, recurring event throughout the calendar year.
The party or similar social function must meet all of the following criteria:
- Total £150 or less per head
- Take place annually, such as a Christmas party or summer barbecue
- Be open to all your employees to attend regardless of seniority or location
This year in light of the pandemic, official HMRC guidance has been updated and now includes the following clause:
“Where an annual function is provided virtually using IT then the exemption is capable of being met provided all other conditions are also satisfied as the exemption applies to allow for costs of provision which are generally incurred for the purposes of the event itself.”
This means that if you are organising a virtual Christmas party for all of your employees, you can provide them with food and drink and take advantage of the maximum of £150 per head tax break. This will apply to the costs associated with virtual parties in the same way that it would for traditionally held, parties.
With this news, it’s time to get Christmas party planning underway. What will you be doing? For full guidance visit the government website.
About the Fabulous Group
The Fabulous Group is a business services group with offices in Market Harborough and Huntingdon. We offer financial, accountancy, and advisory solutions aimed at supporting SME businesses to develop and thrive. The Fabulous Group is formed of a talented team of finance, accountancy, and tax professionals who together have a wealth of knowledge and expertise. For further information visit our website or email [email protected], alternatively, you can call us on 0800 112 0880.