Office parties will, more than likely, have to be online this year because of the coronavirus restrictions that apply across most of the country (check which Tier your area has been placed in). But employers can still say “thank you” to their employees with a physical gift.
HMRC has confirmed that the cost of online staff parties will be an “annual event” for employers qualifying for the tax-free limit of £150 per person inclusive of vat. Remember this is an absolute cap not an allowance, and if the cap is breached the whole amount is taxable and subject to NIC.
The £150 per head limit applies to all those attending the event, not just employees but their partners and spouses too. It should cover the cost (including VAT) of food, drink and any entertainment provided. The employer could send a food hamper (see guidance) to every employee to enjoy while attending the online party, and provide a form of entertainment such as a live comedian, music or a quiz, all delivered online of-course.
In addition to, or instead of the online staff party, the employer can give a physical gift worth no more than £50 to any or all of the employees. These trivial benefits must not be provided in return for the employee’s normal service, and must not be a contractual entitlement. Also, the gift must not be cash or a cash voucher (this includes any individual card which can be ‘topped up’ as this will be classified as one gift and can exceed more than £50).
For employees who are not the company’s directors or their family members, there is no limit to the number of trivial benefits the employer can give during the year. A gift-card that is topped up at intervals with £50 each time would fail this test as the total value given in the year would be counted as one gift.
Directors have an annual cap of £300 for trivial benefits, which also applies to members of their family or household.