A virtual office Christmas Party?

2020 is a year many of us will want to forget.  But if there is one good memory it is the way many small businesses have used ingenuity, determination and often little more than will power to keep going.  Many of us business owners will have been helped tremendously by the same attributes shown by our employees.  It would be great to be able to say thank you.

But the Covid-19 lockdown restrictions have put a stop to one of the traditional ways of doing this - the annual office party.  Luckily, there may be alternatives!

Virtual Christmas parties

A tax exemption exists where an employer hosts an annual event. To briefly re-cap, the event doesn’t have to be at Christmas, it could be held at any time of the year, the key here is that it is an annual event and is made available to all employees, (or all in a particular location where an employer has more than one location), at a cost of less than £150 per head.

All costs of providing the event must be counted when calculating the ‘per head’ cost. This could include:

• Entertainment, food and drink

• Transport and accommodation that enables an employee to attend

• VAT

This list isn’t exclusive, and in arriving at the ‘cost per head’ the total expenses should be divided by the number attending, which may also include non-employees such as spouses.

The £150 is not an annual allowance, if the cost is exceeded then the whole amount will become taxable. So if the cost per head is £160, all £160 becomes taxable, not just the £10 excess.

This year, many meetings and events have been replaced by virtual meetings and events.  No doubt intoxicated by festive spirit, HMRC has confirmed that where all normal conditions are met, virtual events can be included when considering the £150 exemption.

HMRC have given a simple example:

A company holds one annual function in a tax year and does so virtually using IT. All employees are invited and each is provided with a hamper consisting of some food and drink to be enjoyed by the attendees during the party. The total cost per head is £100 which is within the £150 exemption and so the exemption applies.

Who said HMRC was Scrooge?

“Trivial benefits”

Trivial benefits may be given to staff without a tax charge arising.

Certain criteria must be met in order to be counted as a trivial benefit which ensure that:

• It is not cash or a cash voucher and the cost to provide does not exceed £50

• The benefit is not provided as a contractual entitlement

• The benefit is not provided in return for a normal service (or services) expected by the employee – eg hitting a pre-set performance target

Common examples seen include a gift of flowers on a birthday or a turkey at Christmas. More than one trivial benefit can be provided during the year; however, where the employer is a close company and the trivial benefits are given to a director, office holder or members of their families or households, an annual limit of £300 exists.

When all else fails

Perhaps a cash gift or Christmas bonus could present the employer with a simple solution for saying thank you to their employees and spreading a little cheer during the festive season. Even a modest cash bonus can bring out the child in us. Who didn’t love a £5 note from Uncle Charlie tucked into our Christmas cards?

However, do remember that a gift such as this, and for whatever reason it is given, will be subject to PAYE income tax and Class 1 NICs as if it were regular pay.

If you would like any further information on this please do not hesitate to contact us.