Christmas Party Costs

Tax relief for the business?

Yes, this will be an allowable cost for your business as it is to reward and motivate your staff.

Benefit in kind for your employees?

However, there are some rules regarding staff entertaining that you should be aware of, otherwise it could lead to tax consequences for your staff members: 

• All employees are invited 
• Annual event 
• £150 per person (including VAT) maximum spend 

If you spend more than £150 per head, the full amount will be taxable on the staff member; not just the amount above the £150 limit. This tax charge is known as a benefit in kind. If you spend less than £150, there is no benefit in kind tax to pay.

HMRC states that this £150 limit is to cover “annual events”, so if you provide more than one annual event, say a summer social too, then it can still meet the exemption if the cost of both events combined is less than £150 per head. The events must be open to all staff to attend to qualify.

If separate locations or teams have different events, they can still meet the exemption if all staff are invited to one of the events. 

There are different rules if other people attend your party, such as customers and suppliers.

Virtual parties can qualify for the same tax relief as in-person parties.

So as long as you stick to the costs being less than £150 per head, then Happy Holidays to you all!

Need some more help?

Treating your staff can be a very complex area, so call 0203 827 6000 or enquire online here to arrange an appointment with your TaxAssist Accountant and give yourself peace of mind this festive period.

Last updated 16 Dec 2021 | First published 26 Nov 2019

Share

This article is intended to inform rather than advise and is based on legislation and practice at the time. 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 article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

---