HMRC rules regarding Christmas parties for staff

Nov 22, 2014 | Blogs

Staff Christmas parties.

HMRC rules allows businesses to spend up to £150 per member of staff each year before tax is applied.

This applies to any annual party or function which must be open to all staff or, if an employer has more than one site, then open to all the workers at that site. The tax-free limit applies for a tax year so you can hold a summer BBQ AND a Christmas lunch, for example, as long as the total cost for both is less than £150 per head.

The £150 limit is not restricted to food & drink but can include accommodation & transport. Also, spouses and ‘significant others’ can be included in the headcount when computing the cost per head.

Of course, there are a couple of strings attached:

  • It must be open to all permanent members of staff, and
  • You must provide receipts (you can’t just draw out £150 per head & take the team down the pub!)

BUT BEWARE! – Spend just 1p over £150 and the full amount becomes liable for income   tax and National Insurance for both the employer AND the team members!

What about Christmas gifts for employees?

Remember – these ARE taxable. Cash presents such as bonuses or vouchers redeemable for cash, have to have tax & NI paid thru PAYE.

However, if you give your employees a ‘seasonal gift’ such as a turkey, bottle of wine or a box of chocolates, HMRC will not look to tax this provided it can be classed as a ‘trivial’ amount. But note – a box of wine or a food hamper will NOT be classed as ‘trivial’. HMRC will not advise what they class as ‘trivial’ but usually up to £50 is acceptable.

So, if you plan to have a Christmas function or give your team a ‘seasonal gift’, make sure you mark the receipts as ‘Xmas’ so that we can ensure your accounts are correct.

But, most of all, have a great time!