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In a nutshell ... Staff party tax rules

Make sure practice staff do not pay tax on the cost of the annual Christmas bash, writes Simon Pointon.

GP employers need to know what sort of gift to employees is taxable
GP employers need to know what sort of gift to employees is taxable

The season of goodwill can soon turn sour if GPs fail to pay attention to tax law. If you do not stick to the rules, your employees may end up paying tax on the cost of the practice Christmas party.

Each staff member has a tax-free allowance of £150 to cover not just the Christmas party but all functions the practice hosts in the tax year. This includes any costs in connection with bringing a spouse, partner or guest.

GP employers need to check:

  •  What needs to be included in the figure of £150.
  • The number of functions that can qualify.
  • What happens if the £150 limit is breached.

For the £150 exemption to apply, the party must be open to all employees, not just a group. However, holding separate parties at a main and branch surgery will not breach the exemption.

Calculating costs
Cost per head is the total cost including transport and incidental accommodation (including VAT) divided by the total number of people (not just employees) attending the event.

Practices can spread the £150 per person over several events. However, if the total cost of events is over £150 per head, the full expenditure is taxable, not just the excess over £150. So if you hold three events for staff during the year costing £60, £10 and £100 per head, the full cost of the £100 event is taxable.

In calculating cost per head, the total cost including spouses/guests is divided between attenders, not just between employees. If the £150 exemption is exceeded, the employee will be liable for tax on the additional cost of a guest they bring.

If the exemption is exceeded, you may of course wish to meet any liability that arises on your employees. This is usually done via a PAYE settlement agreement - ask your accountant.

The expense attributable to the GP partners attending the Christmas party is not tax ded-uctible but the full cost attributable to staff attending - even if the exemption is exceeded - is an allowable partnership expense.

Gifts and bonuses

  • Trivial gifts such as a bottle of wine, box of chocolates, and a turkey are not taxable in the hands of the employee.
  • Non-trivial gifts such as a case of wine are taxable in the hands of the individual and would have to be treated as a benefit in kind.
  • Cash vouchers or store vouchers are taxable and should be treated as remuneration and included in the payroll.
  • Bonuses of any description are taxable and should be included in the payroll.

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