21 December 2018

Make sure your Christmas do isn’t too taxing

It's that time of year when you invite your staff to unwind after a hard year's work and show them how much you care by splashing the cash on a slap-up Christmas party before you disappear for a week to eat too much chocolate and watch too much TV. But how much of what you've spent on your annual shindig is tax deductible?

Set your Christmas limits

Entertaining clients and staff at Christmas time can be an expensive business and you'll no doubt enter the New Year with a pile of receipts that you might think will bring you some tax relief, but party with caution. 

What Christmas costs can you claim?

At a base level, you should be able to claim for the costs of food, drink, entertainment and any other incidental costs, such as venue hire, transport and overnight accommodation. VAT registered businesses can also recover VAT incurred on these expenses. 

However, there are limits on what you can claim back and it all comes down to motive. Staff incentives are absolutely fine when it comes to Christmas party expenditure, as it is seen to be beneficial for the business, but there are limits, which state that:

  • The event can't cost over £150 (including VAT) per person
  • It must be an annual event, such as a Christmas party
  • All staff must be invited to the party and the majority of guests must be staff
  • Tax exemption does not apply to shareholders if they aren’t employees or directors
  • An £150 per person for a plus one for each employee can be claimed, but only if they are a family member or partner

What is a tax exemption or an allowance?

What also needs to be remembered is that this is a tax exemption, not an allowance. So, if your event costs over £150 per head, you can't claim the first £150 as a business expense and the entire amount will be taxed as normal. 

Meanwhile, the exemption applies to an entire year, meaning the combined cost (per person) of all parties in a single year cannot be over £150.

Tuck into the turkey and let us take the strain

We'd like you to have a great time this Christmas and not have to worry about your tax affairs. So if you do have any festive tax queries, get in touch with our expert tax team on 0115 964 8888 or email us at enquiries@rwbca.co.uk

The views provided in this article are for general information purposes only. Nothing in this article represents advice of any nature whatsoever. Accordingly, RWB CA Limited does not accept any liability or responsibility for the information contained in this article or any decision or other action that may be taken in reliance upon the information contained within it. RWB CA Limited accepts no responsibility for any errors of fact or opinion and assumes no obligation to provide you with any changes to its assumptions.