As an employer providing social functions and parties for your employees you may have certain National Insurance and reporting obligations with HMRC.
If your events held aren’t exempt, then you will need to report the costs to HMRC and pay National Insurance on the full cost of the event if the employees earn more than £8,500 per year.
If your employees are earning at a rate of less than £8,500 per year, then you don’t have to pay or report for these employees as long as they are not directors.
The exemption applies to an annual party (for example, a Christmas party), or similar annual function (for example, a summer barbecue), provided for employees and must be available to all employees generally if the employer has only one location. Additionally, the party or similar social function must be £150 or less per head. If all these conditions are met, then you may not have to report anything to HMRC or pay tax and National Insurance.
If you have two or more annual events or functions costing less than £150 per head combined, then this would still be classed as exempt and there would be nothing to report to HMRC.
The £150 exemption limit includes VAT, even if you reclaim it – a common trap for the unwary. The limit is also applicable to the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.
For further information on whether your Christmas party or other annual events are exempt from reporting obligations, please call our office on 0121 455 8055.
References:
- www.hmrc.gov.uk/manuals/eimanual/eim21690.htm
- www.gov.uk/expenses-benefits-social-functions-parties/overview
- www.telegraph.co.uk/finance/2953552/How-to-avoid-the-Christmas-party-tax-trap
