HMRC has confirmed that the annual parties exemption now also applies to the costs associated with virtual parties and festivities in the same way that it would for traditionally held parties.
The rules allow an exemption where an employer hosts an annual event, meaning that virtual parties which are made available to all employees are exempt from tax where the cost does not exceed £150 per head.
All costs of providing the event must be counted when calculating the ‘per head’ cost. This could include but is not exclusive to:
- Entertainment
- Food and drink
- Transport and accommodation that enables an employee to attend
- VAT
When arriving at the ‘cost per head’, the total expenses should be divided by the number attending, which may also include non-employees.
If the cost is exceeding £150 then the whole amount will become taxable, this is because it is not an annual allowance, but rather an exemption.
The Employment Income Manual has been updated and HMRC includes the following example of how this applies:
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.
Trivial gifts
The statutory tax exemption for providing trivial benefits in the form of gifts still applies. So you can buy an employee a Christmas gift, tax free, so long as it costs less than £50, it’s not cash or a cash voucher, it’s not contractual and it’s not in exchange for services provided
If you need further help or advice about this or any of the measures in place to help businesses affected by the coronavirus, please contact your usual Moore adviser.