Traditional Christmas parties etc. are unlikely this year, but what can you do to celebrate the festive season and keep the Taxman happy?

Christmas parties

There is an exemption in s.264 Income Tax, Earnings and Pensions Act 2003 (ITEPA) that allows employers to provide an annual event without incurring a benefit in kind for the attendees. The conditions are that the event(s) on their own, or in total, add up to a cost of no more than £150 per head including VAT for all costs. There is no mention in the legislation that a party requires in-person attendance. HMRC had been insisting that a virtual party did not meet the terms of this exemption but has now conceded that virtual parties do meet the exemption if within the cost limit.

Trivial benefits

There is no argument from HMRC about the use of the trivial benefits exemption this Christmas if it is funded in the correct way. Section 323A ITEPA provides that a gift given by the employer for personal or seasonal reasons and that costs £50 or less including VAT is not to be treated as a benefit in kind. This would allow for a Christmas hamper or other gift to be sent to the employee as well as, or instead of, a Christmas party. The exemption requires that the employer provides a gift that is not cash.


This means the exemption fails if a line manager buys the gift and then claims a cash reimbursement through expenses. But it would be OK if they had a company credit card as this would not be a cash reimbursement.

Christmas shutdown?

If you have a shutdown over Christmas remember that you cannot claim furlough pay just to cover the shutdown period. Although employees can be on holiday during a furlough period, it must begin before the shutdown and continue after it for it to be within the spirit of the scheme.

The Taxman has agreed that you can hold tax-free virtual parties and still make use of the £50 trivial benefits exemption to buy non-cash gifts for your staff.

This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit or call 01233 653500.