Posted on Wednesday 19 November 2014 by Ulster Business

Christmas parties even hrmc approves

There’s even less excuse for bosses to follow Scrooge’s example with news that HM Revenue and Customers (HRMC) offers a tax incentive to hold Christmas parties.

It allows companies an annual gift of £150 per head for staff parties tax free, according to advisory firm RSM McClure Watters.

The cost per head is worked out by dividing the total cost by the number of people attending – whether they are employees or not. Employees can bring their partners and the employer will still get tax relief on the total costs.

Louise Williams, Tax Manager, RSM McClure Watters said the gift is a bonus for employers but needs to be carefully managed.

“The maximum cost per head should not come to more than £150 and this includes the cost of the function, transport and incidental accommodation (including VAT),” she said. “While £150 per head should provide a very good party, care needs to be taken that the limit is not exceeded – even by 1p.

“HM Revenue & Customs state that this is not an allowance and by breaching the limit the whole cost of the party would be taxable as a benefit in kind on the employee. The £150 limit can even be spread over several events throughout the year and if the total cost exceeds £150, the employer can decide which event should avail of the exemption and which will be taxable.”

Employers can also reward their staff with high street vouchers, but they are taxable on staff, unless the employer has entered into a PAYE settlement agreement with HM Revenue & Customs which allows the employer to cover the tax and National Insurance Contributions due.

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