How much can I spend on my Christmas Party?

I’m often asked at this time of year about the cost of Christmas Parties and how we deal with it for accounting.

There is a tax exemption available for entertaining your employees, but there are some conditions that apply to it. You can claim up to £150 per person for an “annual party” that is open to all staff, so it doesn’t have to be held in December, nor does it have to be related to the festive season –  a summer BBQ for example would also be covered. This £150 includes VAT and applies to all guests – so if your employees bring partners then the cost is split over the full number of guests. If your party costs go over £150 per head then the full cost (not just the amount over £150) becomes a taxable benefit in kind to your employees – and this can prove very expensive to them. You need to watch out for costs at the beginning and end of the party too (taxis home provided by the company, hotel bills) as these are all considered to be part of the cost.

For the company, entertaining employees generally is allowable for Corporation Tax purposes, but entertaining clients is not. If you invite clients to a Christmas Party or other annual get-together you will need to be aware that their cost should be apportioned for Corporation Tax purposes.

For more detailed information please don’t hesitate to get in touch