Is my Christmas party tax allowable?
It’s that time of year again and whether you look forward to the office Christmas party or not the question still remains...is it tax deductable?
The staff party is allowed as a deduction for tax purposes but only if it is related to employees and their guests.
As long as the points below are followed there will be no taxable benefit charged to employees:
- The event must be open to all employees at a particular site.
- Providing that the overall average cost per head of the functions does not exceed £150 p.a. (inc VAT), an annual Christmas party or other annual event is not taxable on those attending. Any guests of staff attending are included in the head count when calculating the cost per head attending.
- All costs must be taken into account, including the costs of transport paid to and from the event, accommodation provided, and VAT with the total cost of the event divided by the number attending to get the average.
- VAT input tax can also be recovered on staff entertaining expenditure. If the guests of staff are invited to the event too, the input tax has to be apportioned as the VAT applicable to non-staff is not recoverable. However, if non-staff attendees pay a reasonable contribution to the event, all the VAT can be reclaimed. If these limits are exceeded employers can pick up the tax cost by using a PAYE settlement agreement.
‘Trivial’ gifts for employees.
Employees may be provided with a seasonal gift by their employer, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. These gifts are considered to be trivial and as such are not taxable. Even with a large number of employees where the total cost of providing a gift to each employee may be considerable, as long as the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned.
Christmas Business Gifts
If you give your customers a gift; it is only allowable for tax purposes if:
- the total costs of gifts to one individual per year does not exceed £50
- gift bears a conspicuous advert for the business and;
- gift is not food, drink or exchangeable vouchers although you can give ‘samples’ of your product even if they are food, drink or tobacco