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Introduction

Many employers provide social functions to their staff. Often this will include some sort of annual event, usually taking place in the summer or at Christmas. See also Simon’s Taxes E4.741A. HMRC guidance is at EIM21690.

The amounts incurred by the employer in respect of the social function are taxable unless there is an exemption from tax as it is considered a benefit to the employees attending.

Exemption for annual parties ― qualifying events

There is an exemption from tax and NIC in ITEPA 2003, s 264 where the employer provides employees with a social function and a number of conditions are met:

1. •

   the function is an annual party

2. •

   the event is available to all employees in the business, or all employees at one location where the employer has multiple locations

3. •

   the cost per attendee does not exceed a set amount ― currently £150

Although the legislation includes the term ‘annual’, HMRC has not to date expected the employer to hold the same event every year. However, the event should be of an