Taxman may prove to be short of festive party spirit

Employees could face a surprise tax bill if their company spends too much on its Christmas party, accountants have warned.

Companies going over the £150-a-head tax allowance the government gives them for their annual staff events spending could land their employees with a benefit-in-kind charge that has to be paid by the individual.

And with the £150 limit unchanged since June 2003, said accountants Blick Rothenberg, more people are set to pay a price for taking advantage of their employer’s Christmas bash.

The risk is even greater this year, it claimed, with many firms having used some of the allowance for Jubilee and Olympic celebrations. In those instances the Christmas party may push them unwittingly over the allowance, creating a new tax liability for employees.

Andy Sanford, partner at Blick Rothenberg, said: “The allowance should be put 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.

“Matters could be simplified by there being no taxable benefit on individuals with the company bearing the tax on parties and celebrations.”