As we approach the Christmas period, the question is always – what can we claim for a staff Christmas party?
If you have a limited company, you can claim your festive or annual party as a deductible expense, subject to the limits below. As long as all of your employees are invited to attend, the whole event will not be taxable, even if you are the sole director/staff member. You cannot claim annual event expenses if you also entertain clients and associates.
You have £150 (including VAT) to spend per head, and you can also spend this on your “plus ones”. The £150 is an all-inclusive figure, so you need to add up the total costs of the evening (incl transport, accommodation, drinks) and divide it by the number of attendees. The total cost has to be under £150, – if it comes out to be £151 per head, the whole lot is taxable, so be careful!
An exemption, not an allowance
The £150 spend is an exemption, not an allowance. You will have to actually spend the money in order to claim the deduction.
If it is not used, the exemption will be lost.
Small gifts given to employees (and directors) can be exempt from tax as trivial benefits providing the following conditions are met:
- The cost of providing the benefit does not exceed £50 (including VAT).
- The benefit is not cash or a voucher that can be exchanged for cash
- The employee is not entitled to the benefit as part of any contractual obligation.
- The benefit is not provided in recognition of a particular service.
However, if the cost of providing the benefit exceeds £50, the full amount is taxable, not just the excess over £50.
Gifts to Clients?
Your gifts will only get tax relief, and you can only reclaim the VAT if they are:
- NOT food, drink, tobacco or a voucher AND
- Carry a conspicuous advert for your business AND
- The cost of that gift, and any other to that person in the year is under £50
So no excuses not to have that Christmas party!
Please note that these rules are for limited companies – unfortunately sole traders do not benefit from the same exemptions!
For more information please contact Rosie Forsyth at Wilkins & Co.