Christmas functions and gifts during the Pandemic
As a result of the Coronavirus pandemic, many employers will have cancelled social events which have become yearly traditions such as summer BBQs and Christmas parties. Many employers are looking at imaginative ways in which some sort of annual office party can continue.
HMRC have confirmed that where an annual party is provided to employees virtually using IT then it will fall under the Annual Social Functions exemption and can be provided free of income tax and NIC, providing the normal conditions of the exemption are met:
- The total VAT inclusive cost of providing the event does not exceed £150 per head (this applies across all annual events);
- The event is annual; and
- All employees are invited to attend.
Employers may instead be looking to bring the festive spirit to employees by way of a present. Where a gift is given to employees, it can be provided free of income tax and NIC provided it meets the following criteria:
- The total VAT inclusive cost of providing the gift does not exceed £50 (per head if provided to a group);
- The benefit is not cash or a cash-voucher (a gift voucher is acceptable);
- The employee is not entitled to the benefit as any part of a contractual obligation or pursuant to a relevant salary sacrifice arrangement; and
- The benefit is not provided in recognition of services performed by the employee as part of their employment duties (e.g. a thank you gift for working hard during lockdown).
The Trivial Benefit Exemption above is available all year round but is never more appropriate than in the Festive Season when gifts are provided for no reason other than the occasion.
Please contact us if you are unsure if you would like further information on any of the points raised above.
Article written by Kate Millard and Max Dunand of the PEM Employment Tax team.