An end of year party can often prove to be an enjoyable way to celebrate the festive period with work colleagues. With this in mind, the Institute of Chartered Accountants in England and Wales (ICAEW) has advised businesses to ensure that their party is as tax-efficient as possible.
An annual staff party could qualify as a tax-free benefit for employees, provided certain conditions are met.
In order for a party to qualify, the total cost per head must not exceed £150 (including VAT, transport and accommodation). An event which exceeds the cost per head limit will be liable for income tax and national insurance.
In addition, the event must be held primarily for the purpose of entertaining staff, and the party must generally be open to all employees based in that location (separate departmental or divisional parties are permissible).
Commenting on tax-efficient seasonal parties, Sarah Ghaffari, Technical Manager of SME Business Tax at the ICAEW, said: ‘A Christmas party is a great way to reward staff for hard work, and as a little festive gift, HMRC allow up to £150 spend per employee, completely tax-free.
‘The Christmas tax exemption can be enjoyed by businesses of any size, so long as it’s within the £150 budget.’