Virtual Christmas parties approved by HMRC

Nov 26, 2020

HMRC has confirmed the annual parties’ exemption will apply equally to virtual seasonal parties.

Current rules permit employers to spend up to £150 per head, including VAT, towards the costs of an annual function without creating a tax liability for their employees and themselves, provided that certain conditions are met.
HMRC has now updated its Employment Income Manual to take account of ‘virtual functions’ with the following example:

‘A company holds one annual function in a tax year and does so virtually using IT. All employees are invited and each is provided with a hamper consisting of some food and drink to be enjoyed by the attendees during the party. The total cost per head is £100 which is within the £150 exemption and so the exemption applies.’

This year many businesses are looking for alternatives to the annual Christmas party, and this news will be welcomed by the 49% of employers who, in a recent CIPP poll, confirmed that they fund the full amount incurred for hosting such events.
More information about this can be found at on the HMRC’s website – Examples of annual parties and social functions
If you require advice about tax relief and exemptions, please get in touch with your accountant.