In a typical year, December provides a perfect opportunity for business owners to reward employees for their hard work, with a celebration that is often the highlight of the annual work calendar. Unfortunately, due to varying lockdown restrictions, Christmas celebrations will need a lot more thought this year with the possibility of social gatherings severely limited.

Fortunately, HMRC has considered the scope of section 264, Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), which details the annual party exemption rules, and has confirmed that the exemption will apply to the costs associated with virtual parties in the same way that it would for traditional celebrations.