Get your (virtual) Christmas party hats at the ready!

20 November 2020

HMRC has confirmed that, the exemption applied to traditionally held annual Christmas parties, will now also apply to the costs associated with virtual parties.

The scope of section 264 ITEPA03 will now apply to providing food, entertainment, equipment and other expenses which an employer may incur when hosting a virtual event. The other normal conditions of the exemption must be met, so the party or similar social function must be all of the following:

  • £150 or less per head
  • Annual, e.g. Christmas party or Summer barbecue
  • Open to all employees of a business

Where these conditions are met, the employer will not be required to report anything to HMRC, or to pay any tax and National Insurance (NI).

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.

The Employment Income Manual (EIM) has been updated to reflect this change, as follows:

“Where an annual function is provided virtually using IT then the exemption is capable of being met provided all other conditions are also satisfied as the exemption applies to allow for costs of provision which are generally incurred for the purposes of the event itself.”

 


The information in this article is accurate at the time of publication. For all the latest information, news and resources on how the COVID-19 pandemic is affecting payroll professions, visit our Coronavirus hub.