Christmas Parties Are Coming!
Parties can cause major headaches: planning can be difficult; you need to find & book a venue before all the best ones got taken.
But by observing a few simple rules, you can make the most of the tax exemption for ‘annual’ events for staff.
The limit is £150 per person attending the event, not per employee, which includes VAT.
So, if your party is for employees & other halves, that’s £300 per couple. If your business is a family-oriented business you can include their children too, for example: a couple with two children the allowance is £600.
The £150 covers all of the costs of providing the function, including travel and accommodation. So, you can’t apply £150 on the party & claim the cost of taxis to the venue as a separate allowable expense.
If you have more than one event per year, the £150 allowance applies so long as the total cost per head does not exceed the limit.
It the cost is more than £150, you cannot add together the total cost, take off £150 and leave just the rest to be taxed. Each party is either completely in or completely outside the allowance. But when you come to complete the annual returns of benefits and expenses (forms P11D) you can choose to enter the combination that gives the least tax liability, as shown by the following example.
Example - Three annual functions
Dave and Nick’s employer holds three functions a year: a Christmas party costing £80 a head; summer party £80; & a day at the races £70.
Dave attends all three while Nick only goes to the Christmas and summer parties.
The race day and either of the other parties total only £150, so Dave is only taxed on one lot of £80.
The two events that Nick attends total £160, so only one of them is exempt and he too is taxed on £80.
Even if Nick paid £10 towards one of the parties that wouldn’t work, because the cost is worked out by dividing the total cost of the party among those attending. But if Nick attends the Christmas party & the day at the races £70, he is not taxed.
If everyone attending was expected to pay £10 that would reduce the cost per head, so if you did that, again Nick would not be taxed if he attended the Christmas party & the summer party.
If you find this interesting and want some more help, why not book a meeting to see what else we can do for you?
