Christmas parties Staff-only functions are tax exempt to the extent that the function(s) are available to all employees generally or those at a particular location, where the employer has more than one location and the total costs of all such function(s) do not exceed £150 per head, per annum. The exemption can apply to an annual party (for example, a Christmas party), or similar function (a summer barbecue), provided for employees in an income tax year. Parties that are restricted to certain individuals, such as directors, are not covered by the exemption. For each function the cost per head should be calculated. The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend (whether or not they are the employer’s employees). Any contribution the employee pays towards the function cost can be deducted from the total. HM Revenue and Customs (HMRC), divide the total cost incurred in the provision of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head. Functions that are outside the scope of the exemption directors and employees, except P9D employees, are taxable on the full cost per head, not just the excess over £150, in respect of themselves and any members of their family and household who attend as guests. It is the event that is tax exempt not the employee, so if there are two annual events in the tax year and the first event cost £80 per head and the second event £100 per head, but an employee only attended the first event, they will be taxed on the benefit of £80, as the second event, being the most expensive per head, is best covered by the exemption. Paul Tew, Pay Magazine Snowdrop provides a range of Payroll solutions that are fast, flexible and easy-to-use, to suit the many and varied needs of each organisation. To find out more about the software and services that we provide, please click here >>