The Tax Consequences of Social Events

The cost of a staff party or other entertainment is generally allowed as a deduction for tax purposes. As long as you meet the criteria outlined below there is no requirement to report anything to HMRC or pay tax and National Insurance.

  1.  An annual Christmas party is not taxable on those attending provided that the average cost per person does not exceed £150.
  2.  The event must be open to all employees. You can have separate parties for separate departments, but all employees must be able to attend one of these events.
  3.  There can be more than one annual event. If the total cost of these parties is under £150 per head. However, if the total cost per head is over £150 then whichever functions best utilise the £150 are exempt and the others taxable.
  4.  It is not necessary to keep a running total by employee but a cost per head per function.  All costs including VAT must be taken into account. This includes the cost of transport to and from the event, food and drink and any accommodation provided.

It is highly recommended when planning a staff party or other annual event to try and stick to the tax rules above. This should ensure that your party does not have an extra tax cost for you or your employees.

Posted by Cassey Nixon on

1st July 2019

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