As the winter months approach and the nights begin to roll in, many businesses start to plan and book their annual Christmas bash.<\/p>\n
<\/p>\n
What is often the most anticipated gathering of the year can also be the most expensive, so a tax exemption can go a long way in boosting the budget.<\/p>\n
Luckily, HMRC offers a specific \u2018annual function exemption\u2019 that allows employers to spend up to \u00a3150 per person on an event completely tax-free.<\/p>\n
However, there are a few important boxes that must be ticked if your company wants to benefit from this unique tax saving.<\/p>\n
The annual function exemption is an HMRC rule that allows employers to host social events without them being treated as a taxable Benefit in Kind.<\/p>\n
Employers can spend up to \u00a3150 per person without any Income Tax or National Insurance liabilities.<\/p>\n
As it is labelled an \u2018annual function,\u2019 it is designed to apply to any recurring annual event hosted by an employer for their employees and can be used for things other than the Christmas party.<\/p>\n
If your staff would prefer a barbecue in the summer months, or an Easter scavenger hunt in Spring, these could also be hosted tax-free.<\/p>\n
For an event to qualify as tax exempt, it must meet three criteria.<\/p>\n
Firstly, the event needs to be once a year or intended to recur annually. A one-off event, like a leaving do or a company anniversary party, will likely not qualify, as they are not regular fixtures.<\/p>\n
Perhaps the most obvious staple of workplace culture is the Christmas party, which is why many companies choose to allocate their annual exemption here.<\/p>\n
Secondly, it must be open to all employees and not an event exclusive to management or directors.<\/p>\n
If a business has multiple branches, it can be location-specific, but the invite cannot be restricted to certain staff members.<\/p>\n
Finally, the cost per head must not exceed the \u00a3150 threshold. If the aggregated cost of a Christmas party works out to \u00a3151, the exemption is lost and the full amount may become taxable as a Benefit in Kind.<\/p>\n
It is important for event organisers to consider this all-or-nothing approach to exemption. Pushing the boat out with tax savings in mind can lead to unwanted tax liabilities if the overall cost per head works out to be greater than \u00a3150.<\/p>\n
Despite being labelled an \u2018annual\u2019 exemption, it doesn\u2019t have to be allocated to just one yearly event.<\/p>\n
HMRC allows you to hold multiple qualifying events over a year, provided the combined cost per head doesn\u2019t exceed \u00a3150.<\/p>\n