Tax-free Christmas parties for all, says ICAEW

The Institute of Chartered Accountants in England and Wales (ICAEW) is urging companies to remember that their Christmas parties can be tax-free, if they adhere to the £150 per employee tax exemption limit set by HMRC.

Speaking in the business publication ByteStart, tax expert Chas Roy-Chowdbury says “Taking note of the Inland Revenue rules now will prevent a New Year tax hangover. For a Christmas party to be tax-free, it must open to all staff, and only up to £150 can be spent on each employee.”

This limit includes the whole event expenditure – including the cost of event venues, hired coaches for transport, and entertainment. ICAEW representative Clive Lewis claims “Not only is having a Christmas party a morale booster to staff, it is also a reward for the hard work that has been put in over the year. Businesses should make the most of the tax-free amount and not just resort to some warm wine and plastic cups in the office.”

The tax-free limit does have its own conditions of use however – if a company spends even one pence over this limit, they will be expected to pay income tax on that amount and on the full £150 per person. Also if businesses hold other events throughout the year – such as a summer barbecue – these costs need to be taken into consideration, and are counted under the £150 limit. It is therefore important to think about which event will bring in the biggest tax saving, and be sure to calculate everything precisely.

However, as the ICAEW stresses, if businesses play by the rules, they can reap the rewards and raise the spirits of their hard-working staff in these tough economic times.