Christmas is just around the corner and it’s the time of year when accountants across the land are asked by clients ‘what can we spend tax free on our company’s Christmas party?’.
Well the answer is pretty straight forward and sticking to a few simple rules will allow you to have a good old tax deductible, benefit free knees up with your colleagues.
So, what do you need to know to ensure that you and your employees have a benefit free Christmas?
Your employee events/parties must cost no more than £150 per person, per year
The employee event must be an annual one, such as a Christmas party or summer BBQ
The event/party must be open to all employees of the company
Spouses/partners of employees can attend the party and they also receive an exemption of £150 as well (ie an employee and partner’s total exemption is £300)
Any costs relating to the party and paid for by the employer such as taxis or hotel stays contribute towards the £150 per head cost.
It’s important to note that if the cost is more than £150 per head, say £175, the whole £175 will be taxable as an employee benefit, not just the £25 difference.
The other pitfall to be aware of is that the £150 cap includes any VAT which may have been added to your event/restaurant bill and any taxi, hotel or similar costs that the company pays for.
If your company holds two annual employee events, both costing £70 per head, the cost of both events is exempt.
However, if say a summer employee event costs £70 and a Christmas party costs £95, the total cost for the year of £165 will exceed the limit. In this case it would be best to treat the most expensive event, the Christmas part, as exempt and the summer event would have to be treated as an employee benefit.
The costs relating to all of the above are allowable against corporation tax.
If you have any questions about the above, then as always feel free to drop us a line.
All that’s left is to say have a great Christmas party (and stay away from the photocopier!) Cheers!!