Annual Staff Parties
Overview
Annual staff functions, such as Christmas parties or summer barbecues can be tax-exempt, subject to specific conditions from HMRC. This guide explains when exemption applies, what counts toward the cost, and how to stay compliant.
✅ Exemption Rules (Summary)
An event is not taxable if:
- It is an annual function (such as a Christmas party or summer BBQ), open to all employees or all employees at a specific location, and
- The cost per head, including VAT, transport, and overnight accommodation, does not exceed £150.
If you hold more than one eligible event in a tax year, only those functions whose combined cost per head remains at or below £150 are exempt. Functions exceeding this amount will trigger a benefit charge for the entire event, not just the excess.
🔗 Link to HMRC guidance on annual parties
📊 Practical Examples
Example 1: Two Events
- Event A: cost per head = £100
Event B: cost per head = £80
Combined: £180 > £150 → Only one event can be exempt.
- Best option: treat Event A as exempt; Event B becomes a taxable benefit of £80.
Example 2: Virtual Event
A virtual event or a hamper-delivered party costing £100 per head qualifies for exemption, provided the other criteria are met.
📘 Related Tax Treatment
- Director-only or one-off events (such as a party for board members only only, a staff leaving party or a 25th-year celebration) don't qualify as "annual events" and are taxable in full.
- Even where staff entertaining is allowable for business purposes under other tax provisions, a benefit charge may still arise if the scale or nature exceeds HMRC expectations - use your judgement!
