Author: monicadb5

An event can be considered a social function and therefore exempt from tax and NIC if the following conditions are met:

1. It is annual (e.g. happening once a year, every year)
2. It is open to all employees, so everyone is invited
3. The cost per head is £150 or less

Examples: Christmas parties, Days Out, Summer BBQ parties etc.

Non-examples: retirement parties, long service award events, team building events, company celebration parties (e.g. company’s 50^th anniversary, etc.)

Note: The cost of £150 or less per head needs to meet the following conditions:

1. It is not an allowance (e.g. if the cost of a party is more than £150 per head, it needs to be reported in full and taxes apply for full amount)
2. It needs to include VAT
3. It can include cost of transport for employees to arrive at the venue
4. It can include overnight accommodation for employees

Notes:

1.  Guests or employee’s guests are added to the total number of attendees when calculating costs per person.

2.  Multiple annual events can be considered one single annual function if the combined costs of the events are no more than £150 per person.

Employers may need to apply for a PSA (PAYE settlement agreement) for entertaining from HMRC. For this they can write to HMRC wishing to apply for PSA, explaining what expenses are covered. HMRC will send them P626 to fill in.

If employers have a PSA for entertaining:

1. They should not put through Payroll for tax or NIC
2. They should not include on P11D
3. They should not pay Class1A, they should pay Class1B

Expenses and benefits included in a PSA must be one of the following:

1. Minor (e.g. birthday gifts)
2. Irregular (e.g. one off relocation expenses)
3. Impractical (e.g. shared car trip, taxi trip cost)

Source:
HMRC Webinars
Expenses and benefits: social functions and parties: Overview – GOV.UK (www.gov.uk)

Trivial benefits are tax exempt (i.e. no income tax or NIC is due either on employer or employee) provided the following conditions are met each time the trivial benefit is given:

1. Amount should be a maximum of £50 per employee
2. Should not be in the form of cash or a cash voucher
3. Should not be part of a contractual agreement with the employee
4. Should not be offered as a reward for work performance.

There is no limit of how many trivial benefits can be offered to every employee in a year, however there is a cap of £300 per year for directors and their family members.

Also trivial benefits does not need to be given to ALL employees.

Examples of Trivial Benefits:

1. Meal out offered for special events (e.g. birthday party for an employee)
2. Turkeys offered on Christmas for each employee, provided the average price is maximum £50 per employee or equivalent vegan vouchers for vegan employees
3. Bottles of wine offered for New Year, or vouchers for non-alcoholic drinks for those who do not drink alcohol.

Examples of non- trivial benefits:

1. Boss offering lunch to some employee who are over working in their lunch break, for the reason of finishing their tasks quicker. These are reward lunches, not trivial benefits.
2. Boss offering vouchers every month to those employee who meet or exceed their targets. Theses are awards, not trivial benefits.
3. Other work-related examples:
4. lunches in workshops/seminars
5. month end drinks
6. monthly meeting lunches/buffets
7. retirement party for the employee who retires (as this is a reward for his working years); Note: other employees can get a trivial benefit attending this party of their retiring colleague.

Please note in above instances other exemptions may apply.

Same benefit multiple times:

Multiple of the same trivial benefit is considered as one, with a cap of £50 per employee (e.g. boss offering sandwiches every week say of £3 each . So total equals £3 x 52 = £156 thus exceeds £50 limit)

Record keeping

Employers should keep clear records of Trivial Benefits – Dates, details and Amounts