Shropshire employers who decide to treat their hard-working staff to a Christmas party should be aware of the tax implications such a celebration creates.
Pam Mason, from our offices on Old Potts Way in Shrewsbury, said HM Revenue and Customs had some very clear rules and regulations when it came to festive events
“In order to qualify for available tax breaks, your party needs to be held annually – although we’re talking about Christmas celebrations, the rules could equally apply to a summer barbecue, a Halloween ball, or any other event that fits with your business’s calendar and culture.
“One-off parties don’t qualify under the criteria, but it is possible to lay on more than one party in a financial year and be exempt from reporting the costs to HMRC.”
But Pam said to qualify for the tax exemption, every single member of staff employed by the company must be invited.
“Even if just one employee is excluded, you will not be able to claim, and you can’t claim the costs involved to put on a party for a specific team either.
“You can hold multiple Christmas parties for different teams on different sites, as long as everyone has the chance to attend at least one event.”
Pam said an employer was allowed to spend up to £150 per person before they were required to report the costs to HMRC – this is calculated by dividing the total cost of the party by the number of people attending.
“The £150 includes VAT and is an employee’s total exemption for all your annual parties, not just for Christmas. So if you put on a summer barbecue in July and a Christmas party in December, the £150 per employee has to be spread across both events – or if you spend more, you could make the claim for one event to be exempt and the second would be chargeable.
“Spending just a penny over the £150 individual exemption though will mean the entire party is liable for tax, so you’ll face a large additional bill and a lot of extra paper work as you’d have to report the cost to HMRC and pay national insurance contributions on it.
“Just how you spend the £150 per employee is up to you whether it’s on a Christmas meal, accommodation, travel or entertainment, but it’s important to know your tax responsibilities.”