Andrew McQueen
Fantastic news for employers! There’s a way you can fund staff social events without generating a tax bill. This isn’t a mere concession—it’s a legit statutory exemption if certain conditions are met.
Picture this: an “annual party or similar function” that’s open to all employees, or at least those at a specific location. During the disquieting times of the Covid-19 pandemic, HMRC showed flexibility by confirming that a ‘function’ could also be a virtual party.
However, there’s an essential stipulation to keep in mind: the cost per head for the party or function must not go over £150, VAT included. If the event’s costs go beyond this, it becomes fully taxable—not just the amount over £150.
Here’s a fun scenario: imagine you’ve already held a Christmas party for staff and wish to have another event. This second event can also enjoy tax exemption, provided the combined cost per head doesn’t exceed £150 in a year.
Here’s the strategic part: If the combined cost goes over £150, you, as an employer, can choose which event will use the exemption. For instance, if the Christmas party cost was £100 per head and the summer event was £70, you can designate the Christmas party for the exemption. But the £70 Summer event will be taxable (not just the excess £20).
Here’s the best part: instead of the employee shouldering the tax on the £70, you can step in and deal with the tax and national insurance on their behalf via a PAYE settlement agreement. How’s that for a feel-good factor for your company’s social events?