Tax Tip 8: How to get the taxman to pay towards your Christmas party

Yes it is possible to get the tax man to contribute to your Staff Christmas Party…

If you provide one annual function for your employees, no charge to tax arises if the cost of the event per head does not exceed £150 (until 5 April 2003 the figure was £75 per head). Therefore each employee gives rise to a £150 tax exemption!

The exemption applies to an annual party (for example, a Christmas party), or similar annual function (such as a summer ball) provided for employees and:

  • available to employees generally or
  • available to employees generally at one location, where the employer has more than one location.

This can include functions that are offered for only certain departments for example in a hospital each ward may have its own Christmas party, they still get the £150 exemption. As long as a party is available generally to all staff at the site, and the other conditions are satisfied, the exemption may apply.

Two or more functions

If you provide two or more annual parties or functions, no charge arises in respect of the party, or parties, for which cost(s) per head do not exceed £150 in aggregate. Where there is more than one annual function potentially within the exemption, HMRC do not expect employers to keep a cumulative record, employee by employee, of functions attended. For each function the cost per head should be calculated. The cost per head of subsequent functions should be added. So if you have to functions the cost per head would be £75 per function! If the total cost per head goes over £150 then whichever functions best utilize the £150 are exempt.

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