As an employer, you’ll have certain reporting obligations when providing social functions and staff parties. However, what you need to report and pay depends on:
- If its an annual event
- If its open to all of your employees
- If it costs more than £150 per head
- Whether the employee is a director
It’s possible that you may not have to report anything to HMRC or pay tax or National Insurance. So what’s exempt?
In order to be exempt, your party or staff function must:
- Cost less than £150 per head
- Be an annual event – such as a Christmas party or a summer BBQ
- Be open to all of your employees
However, if your business operates in more than one location, an annual event that’s open to all staff based at one location is still exempt. You can also put on multiple annual events and as long as the combined cost of the event is no more than £150 per head, they still count as exempt!
It’s important to note that for VAT purposes, the definition of employees does not include partners of existing staff or former employees. Therefore, if you’re party includes guests, you will need to apportion the relevant costs appropriately for VAT. However, the £150 per head applies to everyone who attends your event and not just staff.
What if my event isn’t exempt?
Any events you provide that aren’t exempt will need to be reported to HMRC on form P11D and National Insurance will have to be paid.
You may be able to count the costs of any events that cost less than £150 per head as exempt – unless you’ve already used up £150 limit on a previous event. However, if your party costs more than £150 per head, the whole amount becomes taxable and not just any costs over the £150 exemption.
What if I’m a director?
If you are the director of a company with no employees, the issue of reclaiming VAT becomes more difficult.
When an event is provided only for directors, you cannot reclaim the VAT. However, when directors attend parties with other members of staff, then you can reclaim the VAT.
What if I want to give my employees a present this Christmas?
If you’re planning to give your employees a present this Christmas then there are a few things to be aware of. Firstly, any present paid in cash will always be taxable; this also applies to vouchers.
If you give your employees a seasonal gift such as a bottle of wine, a box of chocolates or a turkey, as long as the cost is ‘reasonable’, HMRC won’t tax it.
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