The Institute of Chartered Accountants in England and Wales (ICAEW) is reminding employers holding a seasonal party to make use of a tax break which permits businesses to spend a specific tax-free amount per employee each year.
For a party to be exempt from tax, it must be an annual occurrence, cost the business no more than £150 per attendee and be open to all employees.
Meanwhile, the introduction of a new trivial benefits exemption from 6 April 2016 allows employers to gift employees items up to the value of £50. Gifts to employees are usually taxable, but may be deemed trivial if they cost less than this amount.
However, the exemption doesn’t cover gifts that consist of cash or cash vouchers, or where the employee is entitled to the benefit as part of a contractual obligation (including under salary sacrifice arrangements).
Additionally, the trivial benefits exemption does not apply if the benefit is supplied in recognition of services performed by the employee as part of their employment duties.
Anita Monteith, Tax Faculty Technical Manager at the ICAEW, commented: ‘The tax exemption for a staff Christmas party is a great way to reward hard work and boost staff morale.
‘Don’t forget if you spend as little as one penny over the [£150] limit, the full amount spent on the party becomes liable to income tax and national insurance.’