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HMRC have updated their manuals to include virtual events within the annual party exemption when assessing Benefits In Kind.

Tax and staff parties

A staff party or an annual function qualify as a tax-free benefit for your employees providing that you meet the following conditions:

An employer may spend up to £150 per head (inclusive of VAT) per year, in providing annual functions and events to entertain its staff.

Provided the £150 limit is not exceeded, there can be any number of parties, for instance, three parties at a cost of £50 each at various times of the year.

Virtual parties

HMRC has updated their guidance to include virtual annual functions within this exemption. Virtual parties cannot have all employees in a single location so would ordinarily fail to qualify. HMRC's revised guidance allows these events to qualify, provided that all of the other criteria are met.

A virtual party is defined as: 

An example of this:

The cost is less than the £150 per head maximum and so the function is tax-exempt.

Useful guides on this topic

Tax-free benefits & perks  
More details on the employee benefits that are not taxable. 

Staff parties and annual functions  
A guide to whether the staff party is a tax free-benefit.

P11Ds: top tips tool kit  
A checklist for employers preparing P11Ds.

External links

HMRC internal manual: s.264 ITEPA 2003

HMRC internal manual: s.264 ITEPA 2003 examples