Section 264 ITEPA 2003

With 2020 being a year of lockdowns, social distancing and working from home, the HMRC have made virtual company Christmas parties exempt from their annual returns.

Section 264 of ITEPA 2003 allows an exemption of a company annual event hosted by an employer at a cost of less then £150 per head  The annual events can be held at any time of the year and made available to all employees.

When calculating the event the employer can consider entertainment, food and drink, transport and accommodation and VAT.

The cost per head should be divided by the total expenses and the number of attendees.

The £150 is not an annual allowance, if the cost is exceeded then the whole amount will become taxable.

Virtual functions

Where an annual function is provided virtually using IT then the exemption is capable of being met provided all other conditions are also satisfied as the exemption applies to allow for costs of provision which are generally incurred for the purposes of the event itself.