REWARD
The total value of the event must then be divided by the number of guests that actually attended the event, not solely the number of employees in attendance. The number is to include any partners or children attending. It’s also worth clarifying that the number of employees in the business or the number of guests that accepted the invitation cannot be used as part of the calculation. Annual functions The £150 per head tax exemption, outlined in ITEPA 2003 section 264, relates to all staff events provided in a single tax year – whatever the reason or whenever it takes place. Remember, it’s an exemption, not an allowance. Therefore, where a single event exceeds a cost of £150 per head, the whole event cost will become taxable, not just anything over the limit. In the case of more than one function being provided in a tax year, for example a Christmas party and a summer BBQ, the total cost of both events combined would need to be less than £150 per head for the exemption to apply.
“The £150 per head tax exemption, outlined in ITEPA 2003 section 264, relates to all staff events provided in a single tax year – whatever the reason or whenever it takes place”
However, if the Christmas party was £135 per head and the summer BBQ worked out at £75 per head, a savvy employer would be within its right to use the exemption for the Christmas party and report the BBQ. Reporting With all that said, what if an employer chooses to provide a party that costs more than £150 per head or a gift that doesn’t qualify as a trivial benefit? The employer could either report the benefit to HMRC, just like any other benefits provided to the employee, then the employee would be liable for the tax and the employer would be charged the class 1A NI.
As it’s unlikely there are many organisations that would expect the
employee to pay the tax liability on their Christmas gift, the employer can request a pay as you earn (PAYE) settlement agreement (PSA). A PSA allows employers to cover the tax and NI due on minor, irregular or impracticable expenses or benefits provided to employees. Further information on PSAs can be found at https://ow.ly/tpie50TUWhU. An article on PSAs by Samantha O’Sullivan, CIPP policy and advisory lead, is available at https://ow.ly/GWaZ50TUWjQ. Hopefully, this will help take the stress out of planning your Christmas celebrations. Wishing you all a very merry Christmas and a happy new year. n
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| Professional in Payroll, Pensions and Reward |
Issue 106 | December 2024 - January 2025
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