A staff summer party is indeed an event which can be tax-free for the employer. Although there might still be time to plan one, the weather hasn’t been very favourable if you’ve been hoping to have a staff barbeque.
Employers may meet the cost of certain social events for staff without creating a tax liability, which used to be a concession but is now a statutory exemption provided certain conditions apply. The exemption applies to an “annual party or similar function” provided it is available to all staff or available generally to those at a particular office or location.
A key condition is that the cost per head of the event must not exceed £150, inclusive of VAT. The key point to note is that if the cost is more than £150 then it is taxable in full, not just on the excess over £150.
If your business has already held a Christmas party it may be possible have another function, and for that to also be exempt from tax, provided the combined cost per head is no more than £150 a year. If the combined cost exceeds £150 for the year the employer can decide which ones should be taken into account to make best use of the exemption. If, for example, the cost per head of the Christmas party was £100, and the Summer event was £70 the employer can nominate the Christmas party to be covered by the exemption, but the £70 Summer event would be taxable (not just the excess £20).
Rather than the employee being taxed on the £70 the employer can deal with the tax and national insurance on the employees’ behalf by way of a PAYE settlement agreement.
If you have any questions for Rachel or the team, do get in touch on 01242 776000 or tax@randall-payne.co.uk.
