Is this taxable?

zara5034

Rather than paying for our staff Christmas party this year as usual, our boss gave us the impression that he was going to make no contribution towards it at all. So a party was arranged between ourselves and about half of the staff decided to attend. One member of staff collected everyone's money and paid it over to the venue.

Our boss has now announced that he will add £30 to each member of staff's December salary that attended the party. This covers the cost of the meal and the taxi that was shared.

So can I put this through the payroll as a tax free reimbursement rather than a Christmas bonus?

PGM

zara5034 wrote: »

Rather than paying for our staff Christmas party this year as usual, our boss gave us the impression that he was going to make no contribution towards it at all. So a party was arranged between ourselves and about half of the staff decided to attend. One member of staff collected everyone's money and paid it over to the venue.

Our boss has now announced that he will add £30 to each member of staff's December salary that attended the party. This covers the cost of the meal and the taxi that was shared.

So can I put this through the payroll as a tax free reimbursement rather than a Christmas bonus?

This is a tricky one. How much did the meal cost? If it was £29.95, then it'd be better to put that exact amount in the wage, and include some back up (receipts from the venue) and then I believe you could just pay it as an expenses payment, tax free.

payrollpro

Zara,

It is a tricky one. Tax free reimbursement, presumably as expenses (?), can only apply if it satisfies the expenses rules and I don't think this one does. It has to be a genuine business journey where subsistence was necessary for that to happen so you have only the annual events exemption to call on. Take a look at booklet 490 to see the business expenses rules.

The trouble with that is the employer has decided to pay the employees the money whereas the general rule is for the employer to fund the event and the employees attend for free for the exemption to work.

I think your client should pay the money, make it tax free but then do a PSA for the year to fund the tax liaiblity.

Payrollpro

zara5034

Thanks Payrollpro

I just feel it is slightly unfair on the employees to be taxed on it (When is Tax fair I hear you ask!) If the employer had paid for the party there would have been no taxable benefit to the employees as it's under the thresholds for that and it would still be allowable for the employer.

I will look into your suggestions

Zara

PGM

payrollpro wrote: »

Zara,

It is a tricky one. Tax free reimbursement, presumably as expenses (?), can only apply if it satisfies the expenses rules and I don't think this one does.

One way or another the staff will get the Christmas meal paid, so seems very unfair that they are taxed if the payment goes through payroll rather than being paid direct by the employer, because the BIK is exactly the same?!

Monsoon

PGM wrote: »

This is a tricky one. How much did the meal cost? If it was £29.95, then it'd be better to put that exact amount in the wage, and include some back up (receipts from the venue) and then I believe you could just pay it as an expenses payment, tax free.

That's the only way you're going to get it tax free, if it's an expense claim for Xmas party. Just paying a round sum into the wages is taxable, sadly.

PGM

Monsoon wrote: »

That's the only way you're going to get it tax free, if it's an expense claim for Xmas party. Just paying a round sum into the wages is taxable, sadly.

Absolutely, that why I said pay the exact amount into the employees wage. Would that help at all? I always avoid the round sum numbers, they stick out and would always be checked over first during an inspection.

K H

From memory i believe it is in order for an employer to contribute up to £75 per person for the Christmas Party.

i appreciate that he isn't paying the venue directly but i have had similar situations and paye inspections and it hasn't been deemed to be a problem.

i would reimburse it tax free.

zara5034

Thanks everyone,

PGM, I do agree with your point on not paying a round sum. The meal was £19.99 and the taxi was £100 between everyone that went.

What about PP's point about it being a genuine business journey? I think I ought to look at that booklet!