The cost incurred of holding staff parties/ social events can be provided as a tax-free benefit, providing certain requirements are met. The events must be annual, open to all staff to attend and the amount spent per head must be less than £150 per (including VAT).
If the total cost per person for all functions during the tax year exceeds £150, the exemption can still be claimed but only if the first two criteria above are met and the events individually cost less than £150 per head.
The exemption cannot be deducted against the cost of any event where the amount per head has exceeded the annual limit. Expenditure for any event not covered by the exemption would be a benefit in kind and need to be reported on the end of year form P11D accordingly.
Expenditure for staff entertaining is allowable as a deduction in your accounts on the basis that it is incurred for the benefit of your employees. For VAT purposes, input tax an be recovered on the proportion of entertaining expenses relating to employees only and not on any such expenditure relating to other guests.
If you would like to discuss this entertaining staff in more detail, please feel free to contact your local TaxAssist Accountant.
By Jo Nockels
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.