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| CHRISTMAS AND THE TAX MAN! |
| Christmas comes but once a tax year…..(and the taxman was getting fat!) |
In the run-up to the office Christmas party season, Paul Davis, from Keens Shay Keens, Chartered Accountants writes that one of the things which is least in the mind of the organisers and the employees (after working out how to deal with the post-party hangover) is the question as to whether the taxman will send a friendly greeting in June, demanding a slice of tax for the perceived benefit of attending the party itself.
Whilst many of you will already be saying “Bah Humbug!”, employers should ensure that to avoid their staff getting a nasty surprise, that they comply with the relevant rules surrounding the costs of annual parties.
An exemption not an allowance
In essence, there is an exemption (and not an allowance; yes, there is a difference!) of £150 per employee, per annum, where an annual party or other similar functions are held within a tax year. The following is important to note:
- the taxman measures annual functions and Christmas parties within individual tax years, and not calendar periods, or other twelve month periods
- the taxman will grant an exemption of £150 in respect of any number of events as long as the average cost per employee, who attend those events falls below this sum. This will cover the party or function itself and any transport or accommodation provided the persons attending it, whether or not they are the employer’s employees
For instance, if a company organises two functions within the tax year which cost an average of £80 in respect of the first and £75 in respect of the second, then for the employees, who attended both events, the entire cost of providing the second event will be chargeable to income tax, and adjusted on your next coding notice; the fact that both events cost the firm £155 and that the exemption has only been exceed by £5 is irrelevant to our friends at H M Customs & Revenue.
The way the rules are written means that your employees will get taxed on the full amount of £75.
Employers beware
Employers beware; if you decided to cancel or postpone a Christmas event, which would have normally have fallen in one particular tax year, and postponed it for, say, a go-karting event in early May and then to hold a Christmas event in the same tax year, could see your employees being charged excessive amounts of tax.
So, beware the small print and ….. Merry Christmas from the Taxman!
This article has kindly been provided by Paul Davis from Keens Shay Keens, Chartered Accountants, Milton Keynes
Call us on 01908 336580 or
email
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Paul Davis
from Keens Shay Keens
www.keens.co.uk
Keens Shay Keens
Sovereign Court,
230 Upper Fifth
Central Milton Keynes,
Bucks, MK9 2HR
Tel: +(44)1908 674484
Fax: +(44)1908 690371
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