Staff parties and workplace events are a great way to reward your employees. However, there are specific tax rules that businesses must follow if you want to make sure these events remain tax-free. Here’s we share a breakdown of the key tax rules for staff events:
1. What Events Qualify for Tax Exemption?
For a staff party or function to be tax-free, it must meet the following conditions:
- The event must be a regular annual occasion, such as a Christmas party or summer gathering. One-off events do not qualify.
- All employees must be invited to attend – either the entire workforce or all employees at a specific location. Events exclusively for directors do not qualify unless all employees are directors.
- The total cost of the event must not exceed £150 per person within the tax year, including VAT.
What Costs Are Included in the £150 Allowance?
The £150 per head allowance is not just for food and drinks – it covers all the costs related to the event. This includes:
- Venue hire
- Catering
- Entertainment – such as live music, games or activities
- Transport for employees to and from the event
- Overnight accommodation, if this is provided
This exemption applies to all eligible events within the tax year. However, if a company hosts multiple events, their combined cost must still stay within the £150 limit for the exemption to actually apply.
Reputable business accountants, such as https://www.hazlewoods.co.uk/expertise/business-accountants/, will be able to advise you regarding the tax implications of staff parties.
What Happens If the Cost Exceeds £150 Per Person?
If the total cost of a staff event goes over £150 per person, the entire amount becomes a taxable benefit rather than just the excess. This means that employees may be required to pay tax on the full cost of the event, not just the portion that exceeds the limit. Employers must report this as a Benefit in Kind on a P11D form, which details expenses and benefits provided to employees.
