The Association of Taxation Technicians (ATT) has released a statement urging the HMRC for clarity on whether companies who host virtual Christmas parties will be eligible for the tax exemption that applies to annual staff celebrations.
The organisation has said due to Covid-19, usual work functions will not be possible this year. Nonetheless, employers are “hurriedly considering” alternative ways to express seasonal greetings and boost morale, but the risk is that online events could create “unintended tax consequences”.
Current rules allow employers to spend up to £150 per head (including VAT) towards the costs of an annual function, such as a Christmas party, without creating a tax liability for their employees and themselves.
Jeremy Coker, president of the ATT, said: “It is a pity that HMRC are still on mute about virtual Christmas parties. There have been suggestions that a virtual party is not really a party for tax purposes, even though so many other activities such as conferences and training have been moved online.”
“We are also concerned that HMRC will seek to split out the cost of any food, drink or party favours sent to employees’ homes as a party box to accompany the online event, and treat this element as a taxable benefit because some employees could opt out of the event itself.”
He added: “We understand that HMRC are considering the matter. We would like HMRC to clearly state that they accept that a ‘virtual’ party falls within the existing rules as an evolution of the meaning of an annual function.
“This clarification is needed urgently because employers are thinking about what they can do for staff now. Indeed, some may already have taken decisions and booked events and supplies assuming the usual tax reliefs will apply and could get a nasty shock if they find that HMRC think differently.”