Social Functions and Parties – Expenses and Benefits Tax Implications
At McDade Roberts we like to reward our staff for all their hard work with a summer and a Christmas “Do”. Lots of fun is always have but do you know the expenses and benefits implications of social functions and parties? Read on for more information.
As an employer, you have certain National Insurance and reporting obligations in relation to providing staff with social functions and parties.
What you need to report and pay depends on:
- if it's an annual event
- if it's open to all of your employees
- if it costs more than £150 per head
- how many events you provide during the tax year
- whether the employee is a director, and how much they earn
Which Social Functions Are Exempt?
You may not need to report anything to HM Revenue and Customs or pay tax and National Insurance if the function meets the below criteria:
- £150 or less per head
- Annual, such as a Christmas party or summer barbecue
- Is open to all your employees
Locations and Departments
If your business has more than one location, an annual event open to all staff based at one location is still exempt. Separate parties can be held for different departments, as long as all of your employees can attend one of them.
Multiple Annual Events Costing Less Than £150 Per Head Combined
As long as the combined cost of the events is no more than £150 per head, they're still exempt. It does not have to be a once a year event.
How to Report and Pay
If any of the events you provide aren't exempt or exceed the £150 per person limit, you will have to report the costs to HM Revenue and Customs and pay National Insurance on them.
What You Need To Do
Multiple Or More Annual Events Costing More Than £150 Per Head Combined
If any of the events cost less than £150 per head, you may be able to count these costs as exempt. But you can't do this if you've already used up the £150 exemption on another event. You will have to report and pay on the full costs of any additional events that go over this limit, even if they cost less than £150 per head on their own.
For more information, please visit the HMRC website page https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21690
McDade Roberts are here to help you navigate the tax minefield. If you would like to discuss the implications of any business or personal finance decision on your tax liabilities, give us a call. The first consultation is always free so you have nothing to lose.