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In the main, social functions and parties provided by an employer for their staff are a taxable benefit on which Income Tax and National Insurance would be due.
However, under certain circumstances, the Annual Parties and Functions exemption would apply.
To qualify, the event or events must:
If your business operates from more than one location, an annual event open to all of your staff based at each location would qualify as exempt. Similarly, separate parties for different departments would qualify as exempt so long as each employee can attend one of them.
You could have a summer barbeque and a Christmas party that would both qualify so long as the combined cost of the events is no more than £150.00 per head.
However, it is key to remember that this is an exemption not an allowance. If the cost of a particular event exceeds £150.00 per head, the whole amount is taxable not just the amount over £150.00 per head.
If you are going to be arranging a staff Christmas party, bear in mind that all the associated expenses must be taken into account in calculating the cost. For instance, this could comprise the venue hire, theming, catering, entertainment, overnight accommodation or taxis home. In addition, the VAT must be included.
On the other hand, the £150.00 per head rule covers everyone that attends the party not just the employees of the company which is an important consideration in budgeting the event.
If you have any questions or would like any further information on the Annual Parties and Functions exemption, please email us at firstname.lastname@example.org.
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