Christmas allowance - personal tax year or company tax year? Christmas allowance - personal tax year or company tax year?
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  1. #1

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    Default Christmas allowance - personal tax year or company tax year?

    Hi all, asking because my current accountant is giving different advice than previous ones. Is it £150 per head in your company tax year or the personal tax year (Apr-Apr)?

    Thanks!

  2. #2

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    It’s an exemption, not an allowance.

    If you have multiple “annual” events you need to consider the aggregate cost per head within the tax year.

    See example 2:

    EIM21691 - Employment Income Manual - HMRC internal manual - GOV.UK

  3. #3

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    Why would a company tax exemption be based on your personal tax year?
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    Quote Originally Posted by northernladuk View Post
    Why would a company tax exemption be based on your personal tax year?
    Because it's not a company tax exemption, it's an income tax exemption.
    EIM21690 - Employment Income Manual - HMRC internal manual - GOV.UK
    Directors and employees, except for 2015/16 and earlier those in an excluded employment (see EIM20007), are chargeable on their share of the expense incurred by an employer in providing a social function for employees, except where Section 264 ITEPA 2003 exempts the charge to tax.
    That cites this provision which just says 'tax year', with no specification of which tax year, but given the legislation in which it is included I'd assume it is the personal tax year.

    The argument to the contrary, perhaps, is that an employee could work part time for a Jewish-owned company in April that has a big Passover party, for a socialist company that has a May Day party on 1 May and spends £150 per head, and for a Christian-owned company with a big Easter party. Then, he could quit all of those and go work for a Sikh who gives his employees a big party to observe the martyrdom of Guru Arjam and by August could be working for a Muslim who has a big Eid al-adha (non-alcohol) celebration. Finally, he starts his own company and by December wants to make up for the abstinence of the last party and has a drunken fling on the company.

    I don't think the tax man is going to try to string all that together and say that you got more than £150 in your personal tax year, so you owe tax and your employers (after the first one) owe NI. Since it is the company that has to figure this out and decide whether to treat it as taxable income, my guess is that technically it may be the personal tax year but everyone just uses the company tax year and no one cares much. But because I'm a nerd and egotistical I decided to try to answer the question without having any firm evidence.

  5. #5

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    As there is only one Christmas in the year, does it matter?

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    Quote Originally Posted by PhiltheGreek View Post
    As there is only one Christmas in the year, does it matter?
    Must admit, that was my wondering too...

  7. #7

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    Quote Originally Posted by PhiltheGreek View Post
    As there is only one Christmas in the year, does it matter?
    Doesn't have to be Christmas.

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    Quote Originally Posted by PhiltheGreek View Post
    As there is only one Christmas in the year, does it matter?
    It just has to be an "annual event", i.e. an event one might reasonably expect to occur annually. It could be a Christmas party, or a Summer BBQ etc. You can have multiple annual events but the total cost per head must still not exceed £150/head across *all* events (again see examples linked to above).

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    Quote Originally Posted by northernladuk View Post
    Why would a company tax exemption be based on your personal tax year?
    It's not a company tax exemption, it's a personal tax exemption. Remember as a rule, company provided benefits are almost always tax-deductible for the company, the issue is whether or not it's taxable on the employee as either a BIK or income and the same applies for company parties.

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    Quote Originally Posted by PhiltheGreek View Post
    As there is only one Christmas in the year, does it matter?
    Even it were always a christmas event, the date varies anywhere from late November, some even do it in January. You could conceivably get two in the same year depending on the year start date.
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