Festive tax breaks for remote workers

Tax-efficient fun

As an employer, you can provide annual social events for your employees without creating a taxable benefit. To benefit from the exemption, your party must:

• be an annual event, e.g. a Christmas party or summer BBQ
• be available to employees generally, or all employees at a particular location; and
• cost less than £150 per head, including VAT.

Remote workers

Remote staff might live hundreds of miles away from the main office, making inclusivity tricky. You’ll naturally want to encourage them to join in with the festivities and one way to do so is to pay for their train tickets or mileage and hotel stays.

These additional expenses count towards the £150 per head limit as they are part of the event’s overall cost. Your costs are likely to be higher this year, given the recent issues with inflation and adding extra travel and accommodation costs can really skew the cost per head.

If you exceed the £150 limit, even by £1, the full amount is taxable, not just the excess.

Example. Acom Ltd has ten employees and hosts a Christmas party. The food and entertainment cost is £1,000, including VAT. Five employees live nearby, but five are remote workers and their combined accommodation and travel costs are £800. The total cost of the event is therefore £1,800 and the cost per head is £180. As this exceeds the £150 threshold, the full £180 per employee is a taxable benefit, subject to income tax and NI.

This can be bad news for your employees but also for you as you’ll have to pay NI at 15% on the taxable amount. Where the exemption doesn’t apply, to avoid looking like Scrooge, you can pay the tax which would otherwise be payable by the employees, but this can double the cost.

Multiple parties

One solution could be to offer a virtual event for remote staff, e.g. the company could provide a hamper to enjoy whilst attending an online event, and a separate in-person party for local employees. Then you can apply the £150 exemption separately to each event. Whilst this solves the tax dilemma it doesn’t really help with team bonding.

Christmas budget

With a little advance planning, you can have a great, inclusive event without racking up a nasty tax bill.

Agree all expenses in advance to avoid surprises that breach the threshold. Or go one step further and have the company book and pay for the travel/accommodation costs to get corporate discounts and take control of costs. Invite more people to spread out the cost per head. For example, invite employees’ partners to bump up the head count.

If you can’t keep the spend per head below £150, ask staff to make a contribution towards costs to stay below the threshold. You can make it up to them by providing a retail voucher as a tax-free perk