Fraser Campbell: Back hospitality with a tax free home office party

Fraser Campbell: Back hospitality with a tax free home office party

Fraser Campbell

Fraser Campbell, head of family business with Azets, has suggested that Scotland’s businesses wanting to thank their staff in the traditional manner at Christmas should back their local hospitality enterprises by taking advantage of HMRC’s tax-free annual exemption of up to £200 for ‘Office’ Christmas parties.

HMRC has recently confirmed that the annual exemption will apply to virtual home-based events, meaning that businesses can spend up to £150 per head on food and drink and entertainment. In addition, the exemption also includes a non-cash gift up to a value of £50.

Businesses wishing to take advantage could, for example, arrange for their staff to be sent a hamper and a bottle of wine, and arrange for them to attend an online quiz or challenge.

It is important to note that the £150 entertainment and £50 gift figures are a maximum. A business can choose to spend as much or as little within those ceilings. It is also important to note that the exemption does not apply just to ‘Christmas’ events – a business can host other company events during the year as long as the overall costs fall within the allowances.

The annual exemption has the potential to unlock significant spending with local hospitality businesses and if enough companies take up the tax-free opportunity, the collective spend could be a major boost for the sector after the success of the ‘eat out to help out’ scheme.

Looking ahead to 2021, if restrictions are tightened or extended, business owners should remember that they could then hold another tax-free event in, for example, the Spring, as long as they keep their overall spend within the allowance.

However, strict conditions and exclusions that apply to the annual exemption rules, and if they are not followed businesses could be liable for the full cost including tax and NIC.

For businesses keen to take advantage of the annual exemption he provided a number of key tips:

  • Events hosted under the exemption must be open to all employees
  • Host a Zoom quiz, and provide the food and drink – perhaps a hamper and a bottle of wine
  • Allow employees to buy their own food and drink, and claim the expense
  • Attendance at the online event must be evidenced – record all attendees
  • Ensure the ‘gift’ is not cash, a contract, or any form of reward
  • As with everything tax-related – keep a detailed record
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