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Are Staff Parties Taxable?

Mainly at the festive period staff parties are high on the agenda for businesses. So, are staff parties taxable?

In Short

Yes and no.

Up to £150 per employee can be spent in a year. Below the £150 qualifies for tax free benefit for the employees. It is also an allowable expense for the business. The staff parties or events must have the primary purpose to entertain the staff. This must be open to all staff. If the business has more than one location it operates from, for example two offices, it must be open to all staff it will affect in that location.

The event cannot be just for Directors, unless all the staff are Directors.

Anything above £150 makes the whole amount taxable. For example, if the staff party costs £155 per head, the whole £155 is taxable not just the extra £5.

How to calculate the cost

Work out the cost of the function or event, including room hire/food etc. Even add the transport and accommodation if provided. Then divide the cost by the number of attendees, this includes guests and ‘plus ones’ of staff. If the total amount is less that £150 per head then it isn’t taxable.

If you have a staff party with an amount of guests that are hard to keep track of, estimate. You can estimate the amount of attendees by looking at your budget, or the amount you booked for.

If you have more than one party/event

If throughout the year the business holds two staff parties for example, and both costs together are less than £150 per head, it isn’t taxable. But if the two amounts exceed the £150 it is taxable.

Here is an example:

The summer a summer event is organised, costing £66 per head.

Christmas Party is organised costing £140 per head.

The total of the two events cost more than £150. So the more expensive £140 event can be organised tax free. The £66 summer event is then taxable.

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