The Annual Christmas Party Exemption – HMRC account for the virtual option

17th December 2020

The rules are that Employers can splash out up to £150 a head on an annual Christmas party without needing to notify HMRC, and this year that also applies to virtual events. However, if the cost of your virtual party this year exceeds £150 per person (including VAT), you will need to pay tax on the entire event – not just the amount that exceeds £150.

Usually, HMRC does not expect employers to keep cumulative records of employees who attend annual functions assuming the cost per head does not exceed the £150 limit during the tax year. However, this year, industry bodies warn, employers may need to demonstrate attendance at an online event for it to qualify under the annual function exemption.

As far as the qualifying criteria goes for this benefit, the online party also needs to be offered to all employees within the business, rather than a select few. It also needs to be an annual celebration instead of a one-off event.

Not surprisingly, many employers are sticking to gifts this Christmas. Under the trivial benefits rule, employers can give members of staff gifts worth up to £50, but not cash, without being liable for tax.

Read more here.

If you require further advice on this year’s party exemption, please contact Rachel Skells or Michael Greene.