How to have a tax-free staff party

We've just had our annual summer event (shuffle boarding in Shoreditch – which we highly recommend!). it's a great way to break up the year (and that long wait to the Christmas party) but it's also a chance to bond more closely with your colleagues, and celebrate your achievements in the first half of the year.

But did you know, you can have a party for your employees costing up to £150 per head (per year) without it being treated as a taxable benefit?

Saving on tax rates in Harrow

The Financial benefits & the rules:

  • The event should be open to all staff generally, though it is possible to have separate parties for different departments.
  • The cost includes VAT together with any extras for food and drink, travel and accommodation.
  • If the cost exceeds £150 (even by £1), you will lose all of the tax benefit.
  • A one-off event, such as a 25th anniversary party, does not qualify.
  • If you hold multiple events each year, and the combined costs exceed £150, you can choose one event to be exempt.
  • To calculate the cost per head, you should divide the cost of each event by the number of people who attended (including any guests).

A party cost example:

You hold a summer barbecue for all your employees (who can bring a guest too). The total cost is £11,200, with 40 staff attending. The cost per head is £140 (£11,200 divided by 80), so there is no taxable benefit for employees.

It may be difficult to establish the exact number attending a large function, but you can give an estimate based on the number budgeted for or booked.

Holding two events annually:

Let's say you have a summer party, which costs £75 per head, and then a Christmas ball at £110 per head. You can choose 'the ball' to be covered by the exemption, and the employees taxed on the £75, as a benefit in kind.

Smaller occasions can be funded tax-free by making use of the £50 trivial benefit exemption. There is more flexibility here, since the only relevant condition when throwing a party is that the per head cost does not exceed £50 and can be organized for a smaller group of employees or department, or held annually.

I hope that has wetted your appetite! Whether you plan to throw some chicken on the BBQ, a cocktail making masterclass or go paintballing, remember to claim back the costs!

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