29th October 2020
The idea of a Christmas party may not be an option, but many employers want to know whether they can organise an event to help bring their teams together. Maintaining staff morale should be something which is high on all employers ‘to do’ lists.
For the majority of employers, the Government’s social distancing measures will make hosting a ‘face to face’ event highly improbable. Given the current situation and taking advantage of the use of Microsoft Teams or Zoom, one idea we have been discussing with clients is the idea of a virtual Christmas party. The employer can arrange for food to be delivered to each employee’s home. Planning the entertainment could result in several innovative ideas, such as an online pantomime or a pub quiz.
Annual function exemption
Consideration should be given to making use of the annual function exemption. Where all of the conditions are satisfied, no tax or National Insurance contributions are payable on costs relating to annual social events organised for employees. The conditions which need to be met include:
- The event must be held each year
- The cost per head must be less than £150 (including VAT)
- All employees must be invited to the event
- Where the employer operates from more than one location, then events can be organised for that location
Social distancing restrictions in place mean that a physical event is unlikely for any but the smallest of organisations. Given the current situation, a pragmatic approach suggests that an online meeting would qualify as a location.
Employers planning a virtual event should consider how it is going to be organised. Employers will need to ensure the spending limits are observed and retain copies of, for example, emails sent to employees inviting them to the event. It will also help to demonstrate who attended as well.
Furthermore, a structured social event incorporating the traditional elements of a Christmas party is more likely to be able to meet the requirements for the exemption. For example, if food, drink and entertainment are provided.
Employers should be able to manage the costs of hosting a virtual event, for example:
- Allocating a budget for employees to order food and drink
- Where geographically possible, employers can order and arrange for delivery of food from a local restaurant
- Employers can organise the entertainment, with everyone joining in online
Using the technology which has enabled your employees to work from home, with some creative thinking, will help employers hold a tax efficient virtual Christmas party.
Trivial benefits rule
A simpler alternative is for employers to provide staff with a gift to help enjoy Christmas.
Under the trivial benefits rule, employers can provide a gift up to the value of £50, including VAT, without paying tax on the item. To qualify, the gift cannot be cash (or a voucher that can be exchanged for cash) and it cannot be in exchange for work or performance.
Consequently, employers can arrange for small hampers or a Christmas gift be sent to each of their employees.
Hopefully this article will provide you with some ideas to help provide some cheer this Christmas.