Are You Planning A Virtual Christmas Party?
We can still eat, drink and be merry ...
Posted by Roger Eddowes on 12/11/2020 @ 8:00AM
Festive cheer may be in short supply this year, and any business that wants to provide some positivity for their team at the end of the year faces some difficult challenges. However, there is no reason why you can't throw a virtual Christmas party ...
A virtual Christmas party is a possibility this year, as are some extra trivial benefits!
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2020 has been unlike any other year in living memory. There's no way we'll be allowed a traditional face-to-face office party unless you have a very small team, but it is still possible to provide some positivity and boost morale as the year comes to an end.
"What could you do that's a little different this year?"
Have you thought about online cookery classes? A virtual pantomime? An online party or a live streaming performance? You could also offer food delivery vouchers or send your team a DIY Christmas party kit then get them all online for a bit of virtual fun.
In the United Kingdom, employers can use the Annual Function Exemption, which means there is no Income Tax or National Insurance due on costs related to social events provided they are offered to all your employees.
There is a limit of £150 per attendee per year, which includes non-employee guests such as spouses. Should the limit be breached, it is the responsibility of the employer to cover Income Tax and National Insurance contributions for all of the costs, not just the breach amount. The Annual Function Exemption includes VAT in its calculations.
While I support virtual events this year, it is worth considering how you are going to demonstrate attendance at an online event so you can be sure you qualify for the exemption. You must have a robust way to collect that data.
Of course, you could hire some entertainment for the virtual event, run a festive quiz, and send vouchers to your employees to ensure they have enough food and drink to enjoy themselves, but do be careful about post-event hangovers, which is very real in a face-to-face party, but often overlooked from a virtual one.
"I recommend vouchers for food and drink rather than an expenses claim, as it is difficult to prove what was for a virtual event!"
As an alternative to an organised virtual event, it may be simpler for you to give your staff a gift to help them enjoy the festivities. Using the Trivial Benefits rule, you can give a gift of up to £50 (including VAT) without paying tax on the item. You can't give cash or a voucher that can be exchanged for cash. It also cannot be a performance-related bonus, so you have to offer it to everyone, not just your star employees.
In the absence of a virtual event, the £50 gifts would be covered as a Trivial Benefit, although the £150 Annual Function Exemption would not apply!
Or you could do both? These two exemptions work side-by-side so employees can be invited to a virtual party (worth up to £150 per head) which is covered by the Annual Function Exemption, and you can give them a £50 gift covered by the Trivial Benefits Exemption. However, remember that if you send them a physical gift as a thank you as well (say a bottle of wine), this must be accounted for in the £50 Trivial Benefits exemption.
There's no reason we can't eat, drink and be merry this Christmas.
Until next time ...
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About Roger Eddowes ...
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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