Contractors’ Questions: Can my World Cup final party be tax-free?

Contractor’s Question: My small IT company plans to throw a party to celebrate the final of the World Cup on July 13th, mainly for our few employees and maybe their partners can come too. Assuming the rules are the same as when we put on our Christmas bash, can we hold this football-themed party tax-free?

Expert’s Answer: Employers can spend up to £150 per member of staff each year without any tax charge, which is guaranteed to kick-off any event in style.

This total not only covers food and drink, but also accommodation and transport home if the employer pays for these. Employees can even bring along their spouse or partner and as long as the cost per head is under the [£150] limit, there isn't any income tax or national insurance to pay. On top of this, the employer will also get tax relief on the total costs, even if the party just lasts for 90 minutes!

The rules apply to any annual party or similar function, which must be open to staff generally or to workers at a particular location. The tax-free limit applies for a tax year, so if the employer puts on a summer party and a Christmas dinner, altogether costing less than £150 a head, both will be tax-free for employees.

But one penny over this limit and the full amount spent on the party will become liable to income tax and National Insurance for both staff and employer alike. It is taxed as a benefit which could prove an own goal.

The Expert’s Answer is based on guidance from the Institute of Chartered Accountants in England and Wales.

Thursday 26th June 2014