As lockdown and common sense rule out the traditional work Christmas parties this year, employers are being inventive in their ways of saying thank you during the festive season. And whilst talk of tax and seasonal gratitude aren’t obvious bedfellows it’s useful to know what is exempt and how you can make your Christmas budget go a little further.
In usual times, an employee event (at any time of year) is tax free as long as the total spend per employee (and any other invited guests) is less than £150 – and that includes all generic costs such as entertainment, transport and refreshments. Once £150 per head is exceeded the whole amount becomes taxable.
HMRC has now extended this £150 allowance to virtual events:
A company holds one annual function in a tax year and does so virtually using IT. All employees are invited and each is provided with a hamper consisting of some food and drink to be enjoyed by the attendees during the party. The total cost per head is £100 which is within the £150 exemption and so the exemption applies.
(Employee Income Manual (EIM) 21690)
These present a different kind of thank you and can be defined by meeting the following criteria:
The benefit is not cash or a cash voucher
The cost to provide the benefit does not exceed £50
The benefit is not provided as a contractual entitlement
The benefit is not provided in return for a normal service (or services) expected by the employee
Examples of a trivial benefit might be a birthday bouquet, Easter egg or wedding present – if under £50 in value. You can give more than one per year as long as it doesn’t exceed £300 in total in the case of benefits given to a director, office holder or family members.
Cash is also completely acceptable but is subject to PAYE income tax and Class 1 NICs – so a £50 bonus would be received in full for anyone whose tax position is below the personal threshold but would be subject to the rate of tax for anyone above it – this means that it is of a higher value to lower paid members of staff.
However you decide to thank your team, bear these measures in mind and your gratitude will be well received. Some good ideas include Christmas or chocolate hampers, advent calendars, online drinks and nibbles (provided you send them out in advance!) or a seasonal pizza delivery!