Yes, it’s that time of year again. It’s time to dig into your pockets and reward your staff for a year’s hard work with a Christmas party. Whether it’s a glass of plonk huddled around the photocopier or a slightly more upmarket affair, the Christmas party can sometimes either feel like a blessing - or a curse.
Whatever your feelings on the Christmas party, there may be a little light at the end of the tunnel – you may be able to claim your staff party as a business expense and therefore treat it as tax deductible.
HMRC has a number of quite complicated rules around what it classes as business entertaining - for a further explanation see our article ‘Understanding allowable expenses with corporate hospitality and business meals’. Many forms of what they class as ‘business entertaining’ are, in fact, not tax deductible, however there is an exemption for certain types of staff entertaining and your Christmas party could fall into this bracket.
Essentially you do not have to report anything to HMRC or pay tax and National Insurance on any event or events that meet the following criteria:
- There is a cumulative spend of less than £150 (including VAT) per head
- It is an annual event such as a Christmas party
- It is open to all of your employees
The cost per head figure can include expenses such as accommodation, transport, food and drink, but it must not exceed £150. If your costs go over by even one penny then it would be classed as having a ‘Benefit in Kind’ and would no longer be exempt. You can also claim for multiple events as long as they meet the other two criteria and their total cost is under £150. So for example if the combined cost of two events (a Christmas party costing £100 per head and a summer barbecue costing £60) came to over £150 then you would only be able to claim for one of these events, which would sensibly be the Christmas party.
The other important criteria to note here is that the event must be open to all staff, if it is an event purely for directors and shareholders for example then this would not be classed as exempt. You could however hold a party for all of your staff in one location, and hold a different party for staff based in a different location, as long as all of the staff in each location is invited to attend their local party. The exemption also covers separate parties that are held for staff in different departments, as long as each staff member is able to attend whichever party they chose.
If you are looking to offset the tax and National Insurance liabilities of your Christmas party then we would recommend getting professional advice from a qualified accountant, as one small mistake could invalidate the exemption. Handpicked Accountants can connect you with a number of thoroughly vetted and highly recommended accountants in your area who you can rely on to provide exceptional accountancy services and advice. Contact us today to find your ideal accountant.
So in this time of festive good cheer, why not treat your staff to a proper thank you, with a little help from the taxman – and as long as you don’t treat them to more than £150!