Bosses can spread some Christmas cheer tax-free
Christmas can be an expensive time but the Institute of Chartered Accountants in England & Wales (ICAEW) is reminding employers that parties for staff at this time of year can be tax-free. HM Revenue & Customs (HMRC) Christmas spirit is however limited, the ICAEW has warned.
HMRC’s ‘gift’ allows companies an annual tax-free amount of £150 a head for staff parties. It is important that the total cost stays below this limit though. This total should not only cover food and drink, but also accommodation and transport if the employer pays for these, plus VAT, divided by the total number of guests. The number of guests should include non-employees such as partners.
The rules apply to any annual party or similar function, which must be open to staff generally or to workers at a particular location. The tax-free limit applies for a tax year, so if the employer gives a summer party and a Christmas dinner together costing less than £150 a head, both will be tax-free for employees. For those who gave parties to celebrate the Rugby World Cup, these should also be included. The gift is available to businesses of all sizes.
Clive Lewis, Head of Medium Issues at the ICAEW, said: “Not only is having a Christmas party a morale booster to staff it is also a reward for the hard work that has been put in over the year. Businesses should make the most of the tax free amount and not just resort to some warm wine and plastic cups in the office.”
For those bosses who are truly entering the festive spirit, they should remember that gifts for employees will be taxable. Cash presents, such as Christmas bonuses or vouchers redeemable for cash will have to have tax and National Insurance (NI) contributions paid via the PAYE system.
But bosses who provide staff with a bottle of wine, a turkey or gift vouchers for high street stores can pick up the tax bill on behalf of their employees by setting up a PAYE Settlement Agreement (PSA) with their tax office.
Mr Lewis added: “Whatever you decide to do for your Christmas party be sure to take advantage of this present from HMRC.”
Media enquiries:
Contact Caroline Florence, ICAEW press office, on 0207 920 8564 or email caroline.florence@icaew.com
