Do you need to report the Christmas party or Christmas bonuses to HMRC?
As we have previously mentioned Benefits in Kind can be processed through the payroll removing the requirement for individual P11Ds. (What’s exempt.) There are exemptions where no benefit needs to be reported to HMRC, such as for trivial benefits (Trivial Benefits). Employee benefits are not as straightforward as they at first appear and there are options for reporting them to HMRC such as payrolling, P11Ds or even a PAYE settlement agreement (Settlement Agreements). Business expenses are generally exempt however and there is no reporting required (Dispensations).
Christmas parties generally do not need to be reported to HMRC as a benefit but there are some criteria that need to be met.
“To be exempt, the party or similar social function must:
- be open to all your employees
- be annual, such as a Christmas party or summer barbecue
- cost £150 or less per person”
The £150 is an exemption not an allowance and if the cost goes over this the whole event is no longer exempt and becomes fully chargeable. The £150 is an annual exemption so if there are multiple events as long as the total is less than £150 per head then the exemption should still apply. (Employment Income Manual)
A cash bonus is considered a part of earnings and would therefore be included in the gross pay and subject to tax and National Insurance deductions. If you have provided goods instead of cash, it is important to determine whether they can be categorized as trivial benefits. If they do not fall into the trivial category, the benefit would need to be reported, typically through a P11D form. (Benefits and expenses through payroll).
If you are unsure then speak to your tax advisor, they will be able to advise on the best course of action for you and your employees.
With all that in mind, we hope you have a very festive Christmas!