Should you be Paying Tax on your Christmas Party?

It's the most popular week of the year for Christmas parties but are you following the conditions for a tax-free Christmas party?

Let's take a look at those conditions:

It must be an annual event. 

This can include Christmas parties, the summer BBQ or the spring ball. So long as it is an annual event. 

The event must be open to all your employees.

You may have parties at different locations for different branches or different parties for departments so long as every employee is invited to one. 

It must cost less than £150 per head. 

This includes everyone that attends, not just employees and counts as an exemption, not an allowance. You cannot throw a party for £200 per head and only pay tax on £50 per person. The total cost be must under £150 per person. You can however throw two annual parties a year; a summer BBQ costing £50 per head and a Christmas party costing £100 per person as part of the exemption. 

It must not be part of a salary sacrifice arrangement. 

If the employees pay for themselves, or a portion of their bill by sacrificing their salary then the party must be reported. These rules do not apply if the function was planned before April 6th 2017, see the UK Gov website for information on when these rules change. 

What should you do if your party doesn't qualify?

You will need to report the costs to HMRC to pay National Insurance by providing details on each employees P11D form. 

For more help on this subject and any other of your tax gripes then please talk to us here at Incisive. 

Merry Christmas from us all!