Understanding the Tax Rules for Office Parties
The HMRC allows a tax exemption for annual parties, including Christmas parties, as long as the cost per head does not exceed £150 (inclusive of VAT).
This exemption covers the entire cost of the event – from the venue to food, drinks, and entertainment.
It’s important to note that this is an annual limit and not just for the Christmas party. If the total cost of all annual parties goes over £150 per head, the entire cost of the events becomes taxable.
The £150 limit is not an allowance; if the cost per head is even slightly over £150, the whole amount becomes taxable.
All staff must be invited to the party for the event to qualify for this exemption. Exclusivity to certain staff members could disqualify the benefit.