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Tax treatment of staff events and gifts

29 November 2022 / Susan Ball , Lee Knight
Issue: 4867 / Categories: Comment & Analysis
’Tis the season of goodwill, or is it?

Key points

  • A staff party qualifies as a tax-free benefit if it meets all the conditions in ITEPA 2003 s 264.
  • The event must be open to all staff and cost no more than £150 for each employee.
  • If the exemption cannot be applied the cash equivalent of the benefit would be treated as earnings.
  • Employers often choose to report taxable staff entertainment costs through a PAYE settlement agreement.
  • Gifts to employees may be covered by the trivial benefit-in-kind exemption.

As the 2022 festive season approaches employers are likely to be planning more employee events than they did in the past two years. Such events and the giving of Christmas gifts to staff have employment tax implications that need to be considered in addition to VAT and business tax consequences.

In this article we focus on events that have the purpose of entertaining...

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