Everything is a little different in 2020, amid the Covid-19 pandemic. The works Christmas party is no exception.
The Covid-19 lockdown restrictions have quite obviously put a stop to the annual office party tradition and have forced employers to rethink alternative ways to wish employees a happy Christmas and to boost morale.
Under usual circumstances, businesses are allowed to spend up to £150 per head on staff attending social functions, such as the annual Christmas party.
Providing no more than £150 is spent per attendee, and the event is open to all your employees, businesses do not have to report how much social functions and parties are worth to each employee, even if they are part of a salary sacrifice arrangement.
But with much of the country subject to national and local lockdown restrictions, it was unclear if, and how, the annual party exemption could be applied.
However, it has now been confirmed by HMRC that the relief will apply to virtual festivities, including gifts consumed at the party.
Speaking to the Institute of Chartered Accountants in England and Wales (ICAEW), the tax office said virtual parties for employees are exempt from tax where the cost per head does not exceed £150, in line with usual practice.
“Having considered the scope of section 264 ITEPA03 (annual parties exemption), we are pleased to confirm that the exemption will apply to the costs associated with virtual parties in the same way that it would for traditionally held parties,” a spokesperson said.
“Therefore, the cost of providing food, entertainment, equipment and other expenses which may be incurred in hosting a virtual event, will be exempt, subject to the normal conditions of the exemption being met.
“It is important to note that the intention of the exemption is to allow for costs of provision which are generally incurred for the purposes of the event itself and that the event, along with any associated provision, is available to employees generally.”