HMRC Reveal Virtual Christmas Party Exemption!

Business owners will know that the year end is always a great opportunity to throw a Christmas party!

You can thank your employees for their hard work over the past year, and celebrate your achievements at the same time!

You’re probably aware of the added bonus; you are allowed an exemption for one annual event, for all employees, if you spend less than £150 per person.

But… what about this year? Does any of this count for 2020 where you cannot meet in person?

Virtual Christmas Parties

Given the year we’ve just had your employees efforts should be celebrated more than ever.

But how do you do this amid coronavirus, whilst still benefiting from the exemption above?

Many business owners have thought that due to the government restrictions – an end of year annual party has to be cancelled. It turns out that’s not the case!

HMRC recently confirmed that the £150 per head exemption is still in place – even if the annual event is held online!

They stated that virtual events can be included when considering the £150 per person exemption, meaning the end of year annual party can move ahead.

How To Ensure Your Party Is Exempt?

Virtual Christmas parties being permitted is big news for employers. Many feared they may have to foot the bill themselves, or scrap the end of year party entirely.

It’s important to understand how the £150 per person exemption works though…

Only one annual event per year can fall under this category. So if you had a summer barbecue already that benefitted from this exemption… then Christmas won’t count towards this.

Employers must also take into account everything that goes into running the event when calculating the £150 per person cost.

This will include (but is not limited to):

  • Entertainment
  • Food & Drink
  • Transport & Accommodation
  • VAT

Once it’s all been calculated the expenses in full should be divided by the number of all who are attending. This might also include non-employees such as partners or spouses.

Remember: If £150 per head is exceeded, the exemption cannot be claimed and the whole event becomes taxable.

You must understand that this is not a £150 per head annual allowance, like many mistake it for (where a business owner can cover anything above that amount). Rather, if the event is over £150 per head, the exemption is lost.

Getting The Right End Of Year Gift

As for Christmas gifts, the best decision is often providing something where your business can benefit from tax exemption too.

These are called trivial benefits and to qualify the gift:

  • must not be cash or a cash voucher.
  • has not cost you more than £50 to provide.
  • cannot be given because it’s already in an employees contract.
  • Has not been provided for their normal service (eg. hitting a performance target).

Cash gifts (Christmas bonuses) to employees will always be subject to PAYE income tax and Class 1 NIC.


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