HMRC also gets into the festive mood and (if you work within the rules) you can have a tax-free works Christmas party.
The rules apply to a works Christmas party or similar function, providing you give all staff the opportunity to attend. You can spend a total cost per head of £150 (or less) and this applies to everything provided at the party, so be very careful especially if you are also providing transport.
The tax-free limit applies for the whole tax year, so if you held a summer event and a works Christmas party, they would qualify as long as the total cost for both is £150 or less per head of persons attending. This means you can bring partners and spouses and they get £150 allowance as well, yes that’s £300 per couple.
Be careful and keep control of costs, the sum of £150 applies to the total cost per head. It is an exemption not an allowance -if you exceed the £150 limit every penny becomes taxable. Also, the amount becomes taxable on the workers and they will become liable for extra national insurance contributions as well.
If you want to give gifts to employees you should be aware that these are taxable.
Cash presents, such as Christmas bonuses or vouchers redeemable for cash, also have to have tax and National Insurance contributions paid through your PAYE system. The alternative for employers who want to give, but without a tax charge attached, is to set up a PAYE Settlement Agreement with their tax office.
Gifts to your customers are not an allowable business expense and will be treated in the same way as business entertainment.
So go and enjoy the festive season with a works Christmas party. Stick within the rules and let the taxman help with the expense.
If you need more information on what is and what isn’t allowable, at Christmas or any other time of the year, or if you want us to help you to apply for a PAYE settlement agreement give us a call today for a free, non obligation informal chat.
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