With the annual Christmas party behind us, now is the time to count the costs to ensure there is no breach of the HMRC rules.
What you need to report and pay depends on:
- if it’s an annual event
- if it’s open to all of your employees
- if it costs more than £150 per head
- how many events you provide during the tax year
- whether the employee is a director, and how much they earn
The £150 per head is inclusive of VAT and includes not only the food and drink, but all other incidentals such as hotel accommodation and reimbursed travel expenses, which can soon mount up!
If the £150 limit is exceeded, this becomes a taxable benefit on the staff – which is unlikely to go down too well with them! An alternative is a PAYE settlement agreement whereby the company picks up the tax and NI liability. This does however increase the overall cost quite significantly.