Kick off summer staff parties’ tax free!

With the World Cup fast approaching and football fever well and truly rising, many work places will be in the mood for a football-themed office party this summer.

The ICAEW is reminding employers that summer staff parties can potentially be tax-free this year. Employers can spend up to £150 per member of staff each year without any tax charge, which is guaranteed to kick off any party in style.

This total not only covers food and drink, but also accommodation and transport home if the employer pays for these. Employees can even bring along their spouse or partner and as long as the cost per head is under the limit, there isn't any income tax or national insurance to pay. On top of this, the employer will also get tax relief on the total costs, even if the party just lasts for 90 minutes.

As many firms are planning a frugal summer party this year due to the fragility of the economy, more staff parties could end up being tax-free. The rules apply to any annual party or similar function, which must be open to staff generally or to workers at a particular location. The tax-free limit applies for a tax year, so if the employer puts on a summer party and a Christmas dinner, altogether costing less than £150 a head, both will be tax-free for employees - a winning result. 

But one penny over this limit and the full amount spent on the party will become liable to income tax and National Insurance for both staff and employer alike. It is taxed as a benefit which could prove an own goal.

Anita Monteith of the ICAEW Tax Faculty explains: "Many businesses have had a tough time this past year and staff probably need a bit of a lift. Having a summer party is a real morale-booster and rewards the hard work that staff put in over the year as well as demonstrating a sense of unity to support England during the World Cup. It is also a good way for businesses to show appreciation for their employees' contributions and encourages their commitment and ongoing efforts."

For further information, visit hmrc.gov.uk.