Ruth Mitchell

The possibility of a tax-free Christmas

Local chartered accountants are reminding employers that staff parties are potentially tax-free.

HMRC’s festive gift is limited though, as companies are only allowed an annual tax-free amount of up to £150 per member of staff. This total not only covers food and drink, but also accommodation and transport home if the employer pays for these. The number of guests can also include non-employees such as partners. On top of this, the employer will also get tax relief on what it all costs.

As many firms are planning a frugal Christmas party this year, more staff parties could end up being tax-free. The rules apply to any annual party or similar function, which must be open to staff generally or to workers at a particular location. The tax-free limit applies for 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.

But one penny over this limit and the full amount spent will become liable to income tax and National Insurance (NI) for both staff and employer alike.

Mike Ranson, President of the Northern Society of Chartered Accountants, said: “Businesses can make the most of the tax free amount and inject some Christmas cheer into what has been a bleak mid-winter in the business world of late.

“It has been a tough time for many organisations and staff are probably in need of having their spirits raised. Having a Christmas party is a real morale-booster and rewards the hard work that staff put in over the year. It is a good way for businesses to show appreciation for their employees’ contributions and encourages their commitment and ongoing efforts.”

For further information please see or speak to your company’s accountant.

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