As most employers are aware, you can host an annual party as long as the following conditions are met and there are no tax implications for you or your employees. The conditions are:
- available to all employees
- not cost more than £150 per head for all attendees.
This year HMRC have confirmed by updating their guidance that the above annual party exemption can now include virtual functions.
What does this mean?
In essence, if you ‘host’ a Zoom meeting which all your employees are invited to join, you can spend up to £150 per attendee to celebrate and be merry all in the comfort of your own home.
Normal parties obviously include food and alcohol and the virtual party is no different! You could send your employee a hamper they can enjoy while listening to Christmas songs or even create a Christmas quiz. There is no set guidance on what your virtual party should include just as long as the above conditions are met. We would also recommend taking a screen shot to confirm the number of attendees should HMRC query this.
Please note that the annual exemption can cover multiple events during the year, (so long as they are annual events and not one-offs), and that the £150 per attendee is not an allowance, ie. if the cost exceeds £150 per head for any annual party, the full amount becomes taxable on the employee and in turn, you as the employer.
If a virtual party is not for you, please remember that although this year has been hard there are tax consequences to giving employees gifts. If you are wanting to reward your employees by giving them a bonus, this should always go through payroll and have the appropriate tax and national insurance deducted from it. If you simply want to send them a bottle of wine or turkey to cheer them up, then so long as this is under £50 then this can be done tax free under the trivial benefit rules.
Whilst there is no stated cap on the number of times a trivial benefit gift can be given, (unless directors are involved), you may also wish to consider this as a means of wishing your staff a Merry Christmas. However, we would urge caution as trivial benefits must never be seen as way of rewarding your staff.
The next step
As always, please contact us with any queries you may have to ensure the correct tax treatment has been considered.
