Tax free staff parties and Covid-19 restrictions
It’s unlikely that businesses will be able to offer their staff Christmas parties in 2020.
⚡But, as per the rules, businesses are able to use the £150 tax free exemption at any other time in the tax year. Yassss!
👉 The tax free amount of £150 per person is not restricted to only Christmas party. You are allowed to use it for any other alternative party or function.
👉 As you may remember the current tax year runs from 6 April 2020 to 5 April 2021.
👉 During that period you can provide for your staff including the director (s) one or more functions income tax free, provided the cost per person does not exceed £150.
👉 You are allowed to arrange for more than one party or function during the 12 months from 6 April to next 5 April. These will remain tax exempt if aggregate does not exceed £150 per person for all the functions.
👉 Let’s say a business arranged 2 parties costing £95 and £52 per person to attend respectively. Total cost per person is £147. This is less within £150 limit. Therefore, tax exempt for all staff members.
👉 Suppose one party costed £95 and the other £56 per person, only the cost of one of the parties will be tax exempt. As the total is £151 per person.
👉Bear this mind.
🔈 Cost per person is calculated as follows:
- the party or function cost plus
(b) transport or accommodation incidentally provided for persons attending it (whether or not they are the employer’s employees),
divided by the number of those persons.
The cost per person includes the number of the persons attending the function, not just the employees.
So, if sole director of the company takes their spouse to the party and total cost amounted to £298. The per person cost will be £149.
You can read further here if you like.
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