Claiming tax relief on your Christmas party

Businesses funding staff celebrations this festive period are being reminded by a leading accountancy firm that they can claim tax relief against the costs of a Christmas party.

Burgis & Bullock, which has offices in Leamington, Rugby, Stratford-upon-Avon and Nuneaton, has shared the guidance as businesses reach the height of Christmas party season.

Chartered accountant Nicole Platten, who works in the specialist tax team at the firm’s Leamington office, has reminded business owners that they are able to claim a £150 per person tax exemption from HMRC for festive celebrations.

This includes venue hire, food, drinks, transport and accommodation – however the event must be open to all employees at a business.

Nicole said: “It’s that time of year where workplaces across the country are buzzing with anticipation for their Christmas party, but these parties can be costly to a business.

“The good news is that HMRC is on hand to help reduce that cost for businesses.

“Christmas party expenses are generally tax-deductible expenses, which mean you can deduct the cost from your profits before tax.

“It’s vital to remember that the event must be open to all employees and the cost must not exceed £150 per head. The £150 can also include a partner or spouse of an employee.

“If you had another all-company event previously in the year, for example a summer party, then the combined cost per head must be under that £150 limit.

“Ad-hoc staff meals generally do not qualify for the exemption.

“Outside of this specific exemption, staff entertainment is considered a benefit in kind. If the cost exceeds £150 per head, then the entire amount will be considered as a taxable benefit in kind and must be included on the employee’s P11d forms.

“This will mean employers must also pay the extra national insurance on the value of the benefit.

“Alternatively, if the Christmas party fails to meet the above conditions, and is therefore taxable, employers can enter into a PAYE Settlement Agreement (PSA) with HMRC to pay the tax on behalf of their employees.

“This exemption is an annual gift from HMRC to help businesses show their appreciation to their staff and celebrate together after a busy year, but it is important to remember that it is an exemption and not an allowance!”

Nicole Platten
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