Employees who take advantage of their firms’ Christmas party could get an extra tax bill, London Chartered Accounts Blick Rothenberg LLP are warning.
“Many employees just don’t realise that if employers spend more than £150 a year on entertaining them they could be liable for an extra tax bill,” said tax partner Andy Sanford.
He added: “Employees don’t realise that if the £150 allowance is exceeded then they are liable and not their bosses. The allowance has not gone up since June 2003, and the Christmas party could be the final item that pushes people over the limit.
“During the year, staff don’t think about the day at the races, the golf day or the summer drinks party. They should, because if a firm spends more than £150 on an individual, then Her Majesty’s Revenue and Customs view this as a benefit in kind which is taxable and will have to be repaid by the individual.”
Andy Sanford said: “The allowance should go up in line with inflation and firms should consider entering into a PSA (PAYE settlement agreement), which means that they pay the additional tax and it is not passed on to the employee, which would be a nice Christmas present.
“Matters could be simplified by there being no taxable benefit on individuals with the company bearing the tax on parties and celebrations.”