CHRISTMAS PARTIES & ENTERTAINING

Are you holding a Christmas Party for your staff?   It may be possible for this to be exempt from tax, provided the total cost per head (food, drink entertainment, transport, etc.) is no more than £150 including VAT.  It must also be an annual event and available to all employees. 

But remember, if you’ve already held a Summer BBQ or similar event you need to look at the combined cost per head . . .

If the combined cost exceeds £150 per head for the year, you can designate which event makes best use of the exemption.  

As an example, if the cost per head of the Christmas party is £100, and the Summer BBQ was £70, you can nominate the Christmas party to be covered by the exemption.   The £70 Summer Event would be taxable (not just the excess £20) but you can deal with the tax and national insurance on the employees’ behalf by way of a PAYE settlement agreement.

VAT is also recoverable on these events as long as partners/spouses or former employees are not included (in which case costs would need to be apportioned). 

VAT cannot be claimed if an event is only for directors, partners or sole proprietors.

CHRISTMAS GIFTS (aka Trivial Benefits)

In addition to the Christmas party entertaining exemption, if you are thinking of giving your employees a gift this Christmas, you won’t have to pay tax if it is classed as a ‘trivial benefit’.  This could be a store or services gift card, hamper, wine, chocolates or the Christmas turkey.  But all of the following must apply:    

• Cost £50 including VAT or less to provide (even 1p more will make the full value taxable)
• Is not cash or a cash voucher (gift vouchers are fine if it cannot be exchanged for cash)
• Is not a reward for work or performance
• Is not in the terms of their contract

The same applies to Directors although a maximum limit of £300 in a tax year applies if you are a ‘close’ company with 5 or fewer shareholders. 

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Merry Christmas and a Happy New Year from

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