The general rule for social functions, provided by an employer for directors and employees, is that the individual is chargeable to income tax on their share of the expense incurred. However, there is an exemption which applies to an annual party. This could be, for example, a Christmas party or similar annual function or a summer barbecue and must be provided for employees and:
– available to employees generally or
– available to employees generally at one location, where the employer has more than one location.
If the employer provides only one annual function for employees no charge to tax arises if the cost of the event per head does not exceed £150. Where an employer organises its workforce at one site into separate sections or departments, an annual party may be provided separately for the different sections (e.g. separate wards in an NHS hospital trust). As long as a party is available generally to all staff at the site, and the other conditions are satisfied, the exemption may apply.
Two or more functions
If the employer provides two or more annual parties or functions, no charge arises in respect of the party, or parties, for which costs per head do not exceed £150 in aggregate.
For each function the cost per head should be calculated. The cost per head of subsequent functions should be added. If the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt, theothers taxable.
If you have any queries, please contact us on 0845 177 5007, by email at [email protected], or by using the contact form on the website.