Make your Christmas party a tax allowable expense

The yuletide season is almost upon us (or arrived months ago depending on where you shop!) and it’s that time for booking the staff Christmas party. The rules on what is allowable for tax purposes when entertaining your employees can be a bit of a mind field and that’s where we can help explain the rules in plain English.

Under normal circumstances, directors and employees are chargeable on their share of the expense of a social event. However there are some exemptions to this.

As an employer, if you provide your staff with an annual party then there is no charge to tax on the employee, the expenses is allowable in your annual accounts and you can reclaim any VAT paid provided that the event was open to all employees and cost less than £150 per head.

If you provide more than one function in the year then the above exemption still applies provided the aggregate cost per head is less than £150. It is not necessary to keep a running total each year by employee but just a cost per head per function.

There are separate rules if the annual total per head is greater than £150 as this figure is not an annual allowance per employee. An example works best here...

You provide a summer barbeque open to all employees at a cost of £110 per head. You then provide a Christmas party at £50 per head. The total cost per employee is now £160. If £150 was an allowance then only the £10 is disallowed. Instead, the entire £50 per head cost of the Christmas party is disallowed as this is the expense that pushed the annual total over £150.

A tricky one so give one of the OA team a shout if you have any questions.