A warning to employers not to be over generous to their employees this Christmas came from a tax specialist today.
If businesses spend more than £150 per head on a festive function, their employees will have to pay tax on the whole amount because it will be treated as a benefit in kind, says Brian Gooch, tax manager at Sheffield-based independent chartered accountants and business advisors Hawsons, of Glossop Road.
Businesses wanting to avoid giving their employees an unexpected tax bill should ensure that the function is open to all staff whatever their position with the company as well as costing less than £150 per head.
This limit is based on the total cost of the event, which can include the provision of transport or overnight accommodation for those attending, plus VAT, divided by the number of people there.
“Another difficulty to be aware of is that if, having accepted the invitation, several people fail to show up for whatever reason, this could conceivably trigger a tax liability for everyone if the £150 limit is exceeded.”