Given the Government’s announcement on 8 December 2021 to work from home where you can following the emergence of the Omicron variant, many employers have again cancelled (or are considering cancelling) their annual Christmas parties and may choose to opt for a virtual event.
HMRC have confirmed that where an annual party is provided to employees virtually using IT then it will still fall under the Annual Social Functions exemption and can be provided free of income tax and National Insurance Contributions (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 the pandemic).
The Trivial Benefit Exemption above is available all year round, albeit there are caps for certain directors and their associates, 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.