As we quickly approach the festive season, it is always a good time to recap on the tax reliefs which are available for staff entertaining.
Generally, all staff entertaining will be an allowable tax deduction for the employer but there may be a charge to taxation on the employee, with the cost of the entertaining being treated as part of their employment remuneration.
To ensure the provision of the Christmas party (or other functions) is a tax free benefit for the employee it will need to meet the following criteria.
To qualify:
- The total costs of the function (including VAT and transport/accommodation) must be less than £150 per person (staff and other quests attending the function) per year.
- The event should be open to all staff.
- The purpose of the event should be a staff function, rather than to entertain clients.
Over the course of the year there can be a number of ‘annual’ events for staff but as long as the £150 limit is not breached in total in the tax year, the events will be a tax free benefit in kind.
Input VAT can be reclaimed but may be restricted if the function is solely for Directors or for an owner manager. It will also be restricted if the event is used to entertain clients.
We recommend records are retained so that it is possible to evidence the numbers attending so that the cost per head can be shown, in the event of any HMRC queries.
Disclaimer
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.