As we are approaching the end of 2020 which has been a year full of not so pleasant surprises, many employer’s may be thinking of more creative ways to arrange socially distant and ‘lockdown’ friendly Christmas parties, replacing the usual in person events. This may see employers taking advantage of digital platforms such as Zoom and Microsoft Teams which we have all become experts on between work meetings and quiz nights with family and friends over the challenging year we have all had.
Before going all steam ahead with arranging a COVID friendly event, we must consider how the normal tax rules surrounding staff entertaining will apply.
Annual Parties Exemption - £150 per head
Typically employers would look to the annual event exemption to exclude the costs of providing their paid for Christmas party open to all employees where the cost falls below £150 per head all in. But how can this be applied to virtual events?
Well, up to now, there has been little guidance from HMRC on this matter, however last week it was confirmed that HMRC’s guidance will be updated to confirm the exemption can be utilised on digital events in the same way as for traditional parties. This means that as long as all employees receive an invite to a virtual event whether that be Company wide or departmental, any costs associated with this can be considered for the exemption. Therefore employers may want to consider the delivery of a meal and drinks to employees attending the event, however it is important these are actually paid for by the Company rather than via expense claims to benefit from the exemption.
Further to this, we must remember that the £150 is not an allowance and therefore should any event exceed £150 per head the full amount will be reportable and not just the excess.
Trivial Benefits Exemption
Aside from the annual party exemption, employers should bear in mind the availability of the trivial benefit exemption. This will continue to operate as normal, meaning employers can provide non-cash gifts such as a hamper to their employee as long as the cost is £50 or less and it is not in recognition of services, without any charge to tax.
If you would like any guidance on providing your employees with virtual parties or gifts this Christmas from a tax perspective, please get in touch with Megan McDonald or your usual AAB contact.