The Staff Christmas Party
The Christmas Party – or any other annual event for that matter – is an allowable expense for the business and is treated as a tax free benefit for the employees.
However business entertaining is not an allowable expense for tax purposes so, whilst you can claim for any such entertaining through the business, the cost will be disregarded when calculating the taxable profits of the business.
Let’s look at the Rules
- All staff must be eligible to attend
- The total cost must not exceed £150 (including VAT) per head. Failure to comply with this rule will mean that the whole cost will be subject to tax and National Insurance, not just the amount over £150.
- Partners may be invited. However, if partners are invited, all staff must be entitled to invite a partner. Invited partners are entitled to a separate £150 per head allowance.
- Provided you hold the event annually it is possible to have more than 1 event – a Summer Ball as well as a Christmas Party for example. Provided the total cost of all these annual events does not exceed the £150 per head allowance no taxable benefit will arise.
- It must be an annual event and not just the cost of taking your employees out every now and then.
- Sole traders or partners in a partnership cannot claim the cost for themselves or their partner. These must be treated as drawings. However, the Director of a Limited Company can include his/her costs as they are an employee of the Company. So a Limited Company with just 1 employee (- the Director) can spend up to £300 in total for the cost of taking their partner out for annual events.
What Can Be Included?
Provided the costs are covered for all staff, all costs associated with the event can be claimed including all food & drink, travel and accommodation costs.
VAT may only be reclaimed on the portion relating to employees. VAT relating to invited partners may not be reclaimed.
If you would like to discuss any of the issues raised in this article, please contact us on 01925 212282 or send an email enquiry here.
(The author does not guarantee the accuracy of any information provided in this article and recommends that you do not take any action, whatsoever, based on the information provided. By the fullest extent permitted by law, the author does not accept any responsibility for any actions you may or may not take based on information contained in this article. This article contains general information and is not a substitute for specific independent professional advice. In addition it is emphasised that much of the information provided in this article is time sensitive. Whilst it is accurate at the time of publication (November 2012) information contained within it may be out of date.)