Generally business can spend up to £150 a head on an annual staff function per annum without there being any taxable benefit.
The exemption applies to an annual party (for example, a Christmas party), or similar annual function (for example, a summer barbecue), provided for employees and:
- available to employees generally or
- available to employees generally at one location, where the employer has more than one location.
Know your limit
The £150 per head limit is for the entire tax year so as an employer if you put on multiple staff functions over a tax year eg. a summer barbecue and a Christmas party then if the total combined cost of all events is less than £150 a head then there will be no taxable benefit.
If staff are allowed to bring along their spouse or partner then they will also get a £150 a head limit.
Could you be taxed?
If this £150 a head limit is exceeded then the employee can be taxed on this as a benefit.
However the employer has the option to enter a PAYE Settlement Agreement (PSA) with HMRC which allows the employer to cover the tax and National Insurance due which the employee would have had to pay on this benefit.
The last thing I am sure employees would want is to have a great staff party but then to come back to work in the New Year and be hit with a tax bill from HMRC.
Therefore, plan your staff entertaining to ensure your employees aren’t hit by a surprise tax bill in the New Year!