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Staff parties - £150 inc. VAT

Is this something commonly missed?

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The £150 annual exemption for staff parties is something I've known for as long I can remember. Yet, I was surprised to see in the legislation that the £150 includes VAT.

 

I notice even the HMRC guidance doesn't mention it (https://www.gov.uk/expenses-benefits-social-functions-parties), although their manuals do.

 

At most firms I've worked at, the basic check come accounts and/or P11D time is to ensure the staff entertainment is less than £150 per head, but this will normally be the net figure. This makes me wonder how many potential benefits have been missed over the years. 

I will be raising the issue internally to ensure it is not missed going forward but thought I'd mention in case it's a common black hole (or perhaps I've misunderstood something here).

Replies (6)

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By Tax Dragon
30th Nov 2021 01:13

It's fair, though, right? Why should some employees get a more favourable tax treatment for no other reason than their employer can recover VAT, and nurses and others whose employers can't get the VAT back be taxed more heavily?

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By ireallyshouldknowthisbut
30th Nov 2021 09:33

its one of those random things that I guess some folks know and some folks dont, but well worth reminding people of.

The problem with HMRC's dumb down guidance you linked to is it is so brief as to be largely meaningless and not fit for purpose. My no.2 gets a ruler over the knuckles for even looking at it as its so often wrong.

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RLI
By lionofludesch
30th Nov 2021 09:36

I've never come across such a generous employer.

Is it a London thing ?

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By Paul Crowley
30th Nov 2021 10:42

All benefits are on a VAT inclusive calculation
See Tax Dragon above

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By AndyC555
30th Nov 2021 10:59

"The £150 annual exemption for staff parties is something I've known for as long I can remember."

Only it's not a "£150 annual exemption". It's a £150 exemption for annual events. S264 ITEPA 2003 specifically refers to "an annual party or similar annual function".

A one-off staff party would not be covered by s264. If you've just been adding up staff entertaining without checking that 'annual' point, you may have been missing a lot.

One firm I worked with had 'great fun' with HMRC who queried the 'annual' summer event the first time it was held. HMRC relented but only on the understanding that they would re-visit the issue the following year to see if it had become an 'annual event'

And subsection (5) confirms that VAT is included.

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By Michael Davies
01st Dec 2021 09:49

Producing P11d s can be a lot trickier to complete than people assume.The gross VAT entry is pretty basic really.In larger firms I have worked for,I have always resisted the possibility of Audit juniors completing them.There have been periods over the years where I have been running several P11d HMRC investigations at the same time.These types of enquiries however, appear to have gone out of fashion at HMRC.

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