“Don’t be a Scrooge”: increase tax exemption for Christmas parties, says ATT
With employers across the UK planning their annual staff Christmas parties, the Association of Taxation Technicians (ATT) has called for the Government not to be a “Scrooge” and extend the tax exemption for social events.
The current exemption allows up to £150 in total per head (including VAT) to be spent each tax year on annual staff functions without incurring a tax liability. The £150 limit has been unchanged since 2003 and covers the total of all events open to staff during the tax year – reducing the amount available for the Christmas party if there have been other events during the year. Exceeding the exemption by just £1 means that it is lost in full.
But research1 shows many firms are now exceeding the exemption, spending up to £170 per person for their festive gatherings.
The ATT2 says many companies, especially those based in London, find the current rate insufficient for their annual gatherings, and has called for the exemption to be raised to £200.
Jon Stride, chair of the ATT’s Technical Steering Group, said:
“The tax-free exemption for annual parties and other social functions should be set at a level that allows employers to provide recognition to all employees generally without incurring a tax liability. We believe that the exemption should be increased to at least £200, including VAT, to take account of the increase in cost of annual staff functions for employers.
“The existing exemption has remained in place for 22 years and the effects of inflation during that time have reduced the overall usefulness of the exemption. Based on the Bank of England inflation calculator, this would now be at least £277 if it had been uprated in line with inflation.
“Rather than being a Scrooge, the Government should adopt the spirit of Christmas by updating the exemption, allowing companies to reward their employees properly during the festive period. To avoid the exemption being eroded again in the future, we’d also urge it to be reviewed regularly, with the intention of it being increased at least every five years.”
Notes for editors: