Virtual Christmas Parties & new COVID tax exemptions

HMRC are getting into the Christmas spirit early in this unprecedented year and have announced special Covid-related tax exemptions for some employee benefits.

Virtual Christmas Parties

With Covid restrictions on in-person gatherings only being relaxed around Christmas Day itself, many employers are looking for alternatives to the traditional work Christmas party – but what are the potential tax implications?

There is a long-standing tax and NIC exemption for work Christmas parties and other annual functions. The conditions are that the function must be:

  • Annual – so not a one-off
  • Available to employees generally, or to employees generally at one location where the employer has more than one location
  • Within a limit of £150 per head for all costs of the event

Where the costs per attendee exceed the limit of £150, the employer must cover the tax and NIC for all costs, not just the excess above £150.

As in-person parties are off the Christmas menu this year, HMRC have confirmed that where an annual function is provided virtually using IT then the exemption is still capable of being met provided all other conditions are also satisfied.  

So, what does that mean for the 2020 party season? Well HMRC give the following example of a Christmas party which would be within the £150 exemption:

  • Virtual online party to which all employees are invited
  • Each is provided with a hamper consisting of some food and drink to be enjoyed by the attendees during the party
  • Total cost per head is £100

So, it’s definitely worth considering whether your business can take advantage of this new exemption to spread some much-needed festive cheer.

Covid antigen testing

Continuing with the festive theme there is a potential stocking filler to consider.

Employees can be given a coronavirus antigen test by their employer without this being a taxable benefit. This temporary exemption applies to any antigen test provided on or after 8 December 2020 up to and including 5 April 2021.

HMRC have also confirmed they will refrain from collecting income tax and NIC due on any tests provided earlier in the 2020/21 tax year.

Find out more

However, if you have any questions in the meantime, or would like to discuss the topics covered in more detail, please contact your local MHA member firm.