UK Taxman Gives A Break To Companies Over Christmas

by Robert Lee, Tax-News.com, London

24 December 2008

Amongst the pressures of a looming recession in the UK, the Christmas office party at least offers an occasion for merriment. And in some cases it can even have a tax advantage for employees, according to leading business and financial advisers Grant Thornton.

"The good news is the tax man has a heart after all and will allow you to enjoy your Christmas party without a tax bill to follow as long as the cost does not exceed GBP150 calculated on a per head basis," explained Mike Warburton, senior tax partner at Grant Thornton.

The current rules on concessions for parties are that all employees are chargeable to tax and national insurance (NI).

However, Christmas or indeed alternative functions of a similar nature are given far more generous treatment by Her Majesty's Revenue and Customs.

For a party to qualify for an exemption, it has to be open to all employees and the cost has to include any transport or accommodation organized by the employer. Both Christmas and summer parties can be enjoyed tax free as long as the combined expense does not exceed the magic GBP150 number.

"The tricky area comes if the cost of the party exceeds GBP150 per head. On this occasion the full amount is potentially taxable as a benefit in kind, unless your employer agrees to do a deal with the tax man and pays the tax for you", Warburton continued, adding:

"The one area that HMRC is less festive in its gestures is bonuses. These are still subject to tax and national insurance. However employers are often able to pay the tax and NI through a PAYE settlement agreement."

Recommended