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How will HMRC view your next corporate away day?
5 January 19 | By: Jas Jhooty
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This week’s article discusses the potential tax consequences surrounding corporate away days.
Corporate Away DaysThese fall under a variety of guises, such as: -
- Sales conferences
- Business strategy review days
- The dreaded “Team Building” event
You may feel that as these are primarily business related there will be no tax consequences. However you couldn’t be more wrong.
HMRC employer compliance officer’s eyes light up when they hear mention of a corporate away days. This is because they invariably view such events as staff entertainment especially if there is a large social or fun element to the corporate event. They will then seek to impose tax & NIC (and interest & penalties) on the total grossed up costs of these events.
Firstly you may be able to take advantage of the ever popular Section 264 ITEPA 2003 exemption of £150 per head for Christmas parties and annual events. However most employers will already have exhausted this statutory concession on their actual Christmas party, so will not be able to do this.
Instead you have to be able to demonstrate the actual business content of the corporate away day. Careful itinerary planning should be undertaken before the event to make sure you have will enough documentary evidence e.g.
- planning the agenda to keep the social/fun element to a minimum,
- preparing presentation slides showing the content of the day
- taking minutes of any discussions held on the day
If you are planning a particularly lavish event or you are planning to hold the event abroad you will find it much harder to argue that the event was of a business nature and not designed as a reward for your staff.
The owner of Iceland found this out to his cost when he took 800 managers on a £5000 per head trip to Disneyworld, Florida . He is now facing a £2.5 million bill for the tax & NIC due on this lavish corporate event.
As well as large events, smaller more mundane instances where you provide staff refreshments (other than tea or coffee) will also be viewed as staff entertainment. Business lunches, team meetings held every Friday at the local pub etc. will be viewed as staff entertainment. If you are aware of such costs being incurred you should make sure you account for the tax & NIC due on your annual PAYE Settlement Agreement
How emTax can help
If you are thinking about planning a corporate away day and are worried about the potential tax consequences, please do not hesitate to contact us. With our many years of experience of dealing with HMRC we can advise you on how to maximise the business content to an acceptable level to render the event safe.
Alternatively if you are currently on the receiving end of a HMRC enquiry into a particular corporate event, we can negotiate with them on your behalf to attempt to reduce the amount of the settlement figure they are trying to impose.