The Company Christmas Party in 2020 – Time for Virtual!
The Covid-19 lockdown restrictions have put a stop to the annual office party and have forced employers to think of alternative ways to wish employees a happy Christmas and to boost morale.
Employers are allowed to host an annual event. This doesn’t have to be at Christmas, it could be held at any time of the year, the key here is that it is an annual event and is made available to all employees, or all in a particular location where an employer has more than one location, at a cost of less than £150 per head.
All costs of providing the event must be counted when calculating the ‘per head’ cost. This could include:
Food and drink
Transport and accommodation that enables an employee to attend
This list isn’t exclusive.
If the cost exceeds £150, then the whole amount will become taxable.
HMRC has now confirmed, that where all normal conditions are met, virtual events can be included when considering the £150 exemption.
An example of this may be a company holds one annual function in a tax year and does so virtually using IT. All employees are invited and each is provided with a hamper consisting of some food and drink to be enjoyed by the attendees during the party. The total cost per head is £100 which is within the £150 exemption and so the exemption applies.
This is great news to almost half of employers who confirmed in a recent poll, that they fund the full amount incurred for hosting the annual Christmas party.
The statutory exemption lays out certain criteria that must be met in order to be counted as a trivial benefit which ensure that:
The benefit is not cash or a cash voucher
The cost to provide does not exceed £50
The benefit is not provided as a contractual entitlement
The benefit is not provided in return for a normal service (or services) expected by the employee – e.g. hitting a pre-set performance target
Common examples seen include a gift of flowers on a birthday, a turkey at Christmas, or a modest layette on the birth of a child. More than one trivial benefit can be provided during the year; however, where the employer is a close company and the trivial benefits are given to a director, office holder or members of their families or households, an annual limit of £300 exists.
When all else fails
Otherwise referred to as a Christmas bonus, arguably a cash gift could present the employer with the most simple solution for saying thank you to their employees and spreading a little cheer during the festive season. Even a modest cash bonus can bring out the child in us (who didn’t love a £5 note from a favourite Aunt or Uncle tucked into our birthday or Christmas cards)?
A gift such as this, and for whatever reason it is given, will be subject to PAYE income tax and Class 1 NICs but the amount that the employee receives in their pay will depend upon their individual circumstances, and particular tax bands.
How do employers normally celebrate during the Christmas period?
A recent survey found that most employers demonstrated their Christmas spirit, and provided gift vouchers (4%), turkeys (1%), chocolates/biscuits (4%), a cash bonus (4%), an annual party (35%) and even some (1%) employers showering unlimited generosity (budget allowing). There remained a some Scrooge-like behaviour, with 46% of respondents admitting to being provided with nothing from their employers at Christmas. Bah Humbug!