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How to have a tax-free Christmas party

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Rebecca Kincade on November 21, 2014 - 9:04 am in Advice, Featured Advice

With only five weeks to Christmas, leading audit, tax and advisory firm, RSM McClure Watters Consulting Ltd, has today advised businesses to make use of the tax-free limit for staff parties.

Embracing the festive spirit, HM Revenue and Customs (HMRC) allows companies an annual ‘gift’ of £150 per head for staff parties, tax-free.

Louise Williams, Tax Manager, RSM McClure Watters said: “The maximum cost per head should not come to more than £150 and this includes the cost of the function, transport and incidental accommodation (including VAT).”

The cost per head is worked out by dividing the total cost by the number of people attending – whether they are employees or not. Employees can bring their partners and the employer will still get tax relief on the total costs.

Ms Williams added: “While £150 per head should provide a very good party, care needs to be taken that the limit is not exceeded – even by 1p. HM Revenue & Customs state that this is not an allowance and by breaching the limit the whole cost of the party would be taxable as a benefit in kind on the employee. The £150 limit can even be spread over several events throughout the year and if the total cost exceeds £150, the employer can decide which event should avail of the exemption and which will be taxable.”

Some employers may be considering rewarding their staff with high street vouchers. Please note these are taxable on the staff, unless the employer has entered into a PAYE settlement agreement with HM Revenue & Customs which allows the employer to cover the tax and National Insurance Contributions due.”

For further information or advice, please contact the RSM McClure Watters Tax Team on .

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