The maximum amount which can be spent on an annual event (such as a Christmas party) for staff is £150 per head, for the event to escape the benefit in kind rules. This cap has not changed for 15 years, and it includes VAT and transport costs.
We are reminding clients of this limit as it applies to the combined cost of all events held for staff during the tax year. If the average cost of the event per head exceeds £150 per head, the full cost of the event is a taxable benefit for the employees, not just the amount above £150. The HMRC employment income manual makes it clear that £150 is a cap, not an allowance.
However, there are other ways in which employers can treat their staff. The trivial benefit rules allow an employer to make non-cash gifts to their employees of up to £50 per time, on an unlimited number of occasions per tax year. If this cap is not breached the gifts are free of tax and NIC. Where the recipient of the gift is a director of the company or family member of a director, the value of trivial benefits is capped at £300 per year, and each individual gift is still capped at £50.
The trivial benefit rules can be used to take staff out for a meal where the cost is no more than £50 per head. Alternatively, vouchers can be given to staff to use for taxis home from the Christmas party, or for them to use at the bar at the party.
You need to be clear that the vouchers are acquired by the employer and given to staff irrespective of whether they attend the event, so the cost of the drink/ transport voucher doesn’t eat into the £150 per head party cap.
Written by the Tax Advice Network