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Christmas parties are staff entertaining. However, there is no benefit-In-kind
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tax charge for employees, and no national insurance liability for employers, if such an event is open to all employees, or all employees at a particular location and the cost per guest (not just staff) is not more than £150 including VAT.
'Cost' here means all costs (including travel and accommodation) before employee contributions. So, if an employer wishes to keep the cost of an event below £150 per head by. for example, asking guests to pay for their drinks, this should be done by providing a pay Oar.
The £150 limit is an annual amount for one or more events, and the whole cast of an event that causes the limit to be exceeded is taxable. If, for example, there were three events costing £30, £20, and £110, the employer could regard those costing £30 and £110 as exempt, and the taxable amount per attendee would be £20. The taxable amount for an employee who brought one member of their family or household to that event would be £40.
In borderline cases, 'no-shows' could prove expensive for everyone else — for example, an exempt cost of £145 per head for 20 employees would turn into a taxable cost of £161 per head, plus a national insurance cost for the employer, if one couple failed to attend.
• Karl Vernum is an employment tax manager with BDO