Income Tax (Earnings and Pensions) Act 2003 section 264

Annual parties and functions

Section 264 sets out the tax exemption available for annual parties or similar functions provided by an employer for its employees, subject to a cost-per-head limit of £150.

• The exemption applies to annual parties or similar functions that are open to all employees generally, or to all employees at a particular location
• If only one qualifying event is held in the tax year, it is exempt from income tax provided the cost per head does not exceed £150
• If two or more qualifying events are held, one or more may be exempt provided the total cost per head across the exempt events does not exceed £150 in aggregate
• The cost per head is calculated by dividing the total cost of the event — including transport, accommodation and VAT — by the number of people attending, whether they are employees or their guests