Christmas party season 2022

Christmas party season 2022

Christmas party season 2022

How many prosecco’s can I have and keep the tax man away?

With Christmas parties being unleashed again, and no more awkward ‘virtual zoom parties,’ I imagine many will be making up for lost time this time around. So just how much of a good time can we have before the tax man comes knocking? 

There are special tax provisions for the annual staff Christmas party. Provided the party meets certain conditions, it is an exempt benefit for staff so won’t be taxable or subject to national insurance contributions.

The Christmas party must be available to all employees and the total cost must not exceed £150 per head. This limit is VAT inclusive and extends to the cost of the venue, food, drink, accommodation, transport and so on…

Where it is not feasible to hold all employees in one event, the exempt rules still apply to separate parties for different departments/in different locations, but all employees must have the option of being able to attend one event.

Therefore, leaving the free bar open all evening could prove expensive… as soon as this £150 cost per head is exceeded the entire amount is brought into tax.

If it does exceed £150, this triggers a benefit in kind payable by each employee. Bah humbug! However, to not ruin the festive cheer of staff, the employer can enter into an agreement with HMRC to settle this on their behalf, known as a PAYE settlement arrangement (PSA).

This £150 per head is an annual aggregate and could also include the cost of other annual functions. Should this £150 be exceeded, employers could ask employees to make a contribution to keep it within the limits.

There is nothing worse than a tax bill being added to the hangover. So, make sure you are aware of the rules…. maybe have a check of the numbers before going for that 10th drink (said no-one ever)!