Christmas is around the corner and you may be throwing a Christmas party in the near future. We all need to be treated after the hectic year we’ve had.
Lets discuss the taxes on business parties, this could be an annual Christmas party or an annual barbeque. Depending on the event, you may or may not have to report this to HMRC and pay taxes.
The points to consider are:
It must be an annual event (happens once a year on a recurring basis). Parties such as retirement parties, team building events are taxable and must be reported to HMRC.
This event must be open to all employees and not selected employees
The total cost per person must be capped at £150. This will include employees, partners and any household members. This £150 total includes VAT, transport and overnight accommodation.
Cost per person = Total Cost/Number of Attendees
Number of Attendees includes non-employees such as partners.
You will not have to pay any taxes to HMRC if all of the following conditions are met.
If the cost per person exceeds £150, the whole amount will become taxable.
No, the £150 limit could be used across more than one event. However, the combined cost cannot exceed £150 per person.
In certain cases, if there is more than one annual event and the cost per person exceeds the £150 threshold, it is possible to get an exemption for the second party. This is known as trivial benefit (you must meet the conditions of the Trivial benefits).
If the conditions are met, the cost of the party must be reported on a P11D for employees (Section K) or reported on payroll if the company has registered for payroll benefits.
Employers will be required to pay Class 1A National Insurance contributions.
If you have a PSA, you will not have to report the annual party on payroll or your P11D. You will not need to pay Class 1A National Insurance. Employers will be required to pay Class 1B National Insurance (it is the same national insurance rate, it just falls under a different category).
The following types of expenses and benefits can be included in the PSA:
For further information, you can find it here.
If you would like to discuss any of the above, please email us on email@example.com about the party you are considering.