SE21690 - Benefits: Christmas parties and other social functions

Extra Statutory Concession A70

Directors and employees within Part V Chapter II ICTA88 are chargeable on their share of the expense incurred by an employer in providing a social function for employees except where ESC A70 is satisfied. The full text of the concession is

"Where an annual Christmas party or alternative annual function of a similar nature, such as an annual dinner dance is open to the staff generally, the Inland Revenue will not seek tax on the relevant benefit arising to each employee where the expenditure is modest. In this context Tax Offices will treat expenditure of up to £75 per head per annum as modest. "£75 per head" means the total cost of the function, including VAT and any transport or accommodation provided by employer, divided by the number of people attending.

Where the cost of the entertainment is more than £75 per head, tax will be payable on the full amount assessable under the relevant charging provision. Where there is more than one annual function and their total cost exceeds £75 per head, the functions that total £75 or less will not be taxed. Any other functions will be taxed in full".

Note that the exemption applies to any Christmas party or alternative function of a similar nature such as a dinner dance. It can apply to more than one function in an Income Tax year.

The figure of £75 is not an allowance. For functions which are outside the scope of the Concession (See example at SE21693) directors and employees are chargeable on the full cost per head, not just the excess over £75, in respect of

• themselves and
• any members of their family and household who attend as guests.

The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people ( including non-employees) who attend in order to arrive at the cost per head.

Where there is more than one annual function see SE21692.

(See examples at SE21693 and SE21694.)