‘Tis the season to be jolly- claiming a Christmas party allowance
By PaperRocket Accounting, Nov 14 2018 03:11PM
It’s now less than 6 weeks until the big day itself. Perhaps you’re feeling smug because you’ve already got all your presents bought and wrapped, or maybe you’ll be frantically late night shopping the week before. But whichever camp you fall into, it’s definitely time to start planning a festive celebration for yourself and your members of staff. Not only is it a great way to show your employees how valued they are, staff entertainment expenses are tax deductible, so you can increase staff morale whilst decreasing your corporation tax bill!
What is the limit?
HMRC will provide tax relief on up to £150 per person per year. This can also include partners of employees.
Provided the amount does not exceed £150/head, your limited company will receive corporation tax relief on the expense, and it will not be treated as a benefit in kind (meaning employees will not have to pay additional tax/NI).
• The event must be open to all members of staff.
• The £150 can cover multiple events throughout the year, again, provided the total amount spent doesn’t go over £150/head. So, you could spend £50/head on a Christmas party for your staff, and then later in the year £100/head for a Summer shindig!
• If the £150 limit is exceeded, even by 1 penny, the whole amount will become disallowable and therefore treated as a benefit in kind for your employees, meaning additional tax and NI will be due.
• The £150 is VAT inclusive and also includes any extra costs such as travel and accommodation.
• The primary cause of the event must be to entertain employees. The total cost will be disallowed for tax if it is found that entertaining customers is indeed the primary function.
As with all company expenses, receipts must be retained.
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