Tax Exemptions For Virtual Christmas Parties

Tax Exemptions For Virtual Christmas Parties

Are you a company that usually has an annual Christmas Party?

This year due to social distancing measures some Companies are deciding to have a virtual party online. 
Have you considered having one but are wondering what the tax implications are?
Usual Christmas Party Rules are as follows:
  • All employees have to be invited to the party
  • Cost per head must be no more than ¬£150
If you stick to these rules there is no P11D Benefit in Kind charge for your employee and you do not have to pay any Employer’s Class 1A national insurance at 13.8%
So how do you stand with a virtual Christmas Party?
Well the GOOD NEWS is that HMRC have said the following:

” the cost of providing food, entertainment, equipment and other expenses which may be incurred in hosting a virtual event, will be EXEMPT, subject to the NORMAL conditions. The intention of the exemption is to allow for costs of provision which are generally incurred for the purposes of the event itself, and that the event, along with any associated provision, is available to employees generally”

TIP – The exemption applies not only to your staff but their guests e.g. their spouse, partner or friend.
Second TIP – In providing food and drink:
  • Give your employees a budget to spend
  • Reimburse them, tax and NI free, the lesser of the amount they have actually spent or your original budget.
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