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Virtual Christmas parties will qualify for tax exemption

Posted by
Rouse Partners
08.12.2020

HMRC has confirmed that they will accept a virtual Christmas party as an event which is capable of falling within the tax exemption rules for annual functions.

Statement from HMRC

Having considered the scope of section 264 ITEPA03 (annual parties exemption), we are pleased to confirm that the exemption will apply to the costs associated with virtual parties in the same way that it would for traditionally held parties.

Therefore, the cost of providing food, entertainment, equipment and other expenses which may be incurred in hosting a virtual event, will be exempt, subject to the normal conditions of the exemption being met.

It is important to note that 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. We will be updating our GOV.UK guidance shortly.

The rules allow employers to spend up to £150 per head (including VAT) towards the costs of an annual function such as a seasonal party, without creating a tax liability.

To qualify the party must be an annual event which is open to all staff generally, or all staff at a specific location, if the employer has more than one location.

If the employer has more than one annual event in a tax year, for all the events to be tax-free the combined cost per head must be no more than £150.

For further reading

You can find further details on the tax rules regarding Christmas parties and other staff functions and entertainment here.

You can find further details on making tax-free gifts to employees here.

Contact us

We are a west of London based firm of chartered accountants with an experienced team of tax advisors who can provide advice for individuals and companies on tax efficient employee benefits and gifts. Contact us today to discuss your circumstances and how we can help.

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This information has been produced by Rouse Partners LLP for general interest. No responsibility for loss occasioned to any person acting or refraining from action as a result of this information is accepted by Rouse Partners LLP. In all cases appropriate advice should be sought before making a decision.

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