World Cup partygoers could face painful tax penalties

Thousands of workers enjoying generous World Cup hospitality from employers desperate to keep them at work could face a nasty tax headache according to a leading accountant. Blick Rothenberg, the London-based tax specialist, is warning that employees could have to pay tax on the value of food and drink provided by their bosses at World Cup parties.

The warning follows reports that employers around the country are laying on screenings of World Cup games, often with free food and drink, in order to counter expected increases in absenteeism.

Under income tax rules, employers who invite staff to social functions have to declare the hospitality to HM Customs & Revenue if the cost per worker amounts to more than £150 over the course of a year. Christmas parties are generally exempt because it is unusual for employers to spend that much per head, but Blick Rothenberg believes that the extra expense of World Cup hospitality could take some workers over the limit.

Staff receiving hospitality worth more than £150 in a year would then be charged income tax at their highest marginal rate on the whole value, not just the excess. Employers have the option of settling the tax bill for them, but many will not be willing to incur the additional expense.

"Any events falling outside the exemption are strictly taxable, so employers will need to bear that in mind if they hold World Cup events where food and drink is supplied," said Matt Coward, a tax specialist at Blick Rothenberg. "In the excitement, it may be that many organisations overlook the strict reporting requirements so it will be interesting to see what view the Revenue takes of lapses."

A spokesman for HM Customs & Revenue said that the rules on such perks were clear and that employees whose bosses declared spending of £150 or more would face higher tax bills. However, he added: "Food and drink would count towards the limit, but there are unlikely to be too many inquiries into this sort of thing - we have bigger fish to fry."