This time last year, it’s fair to say that for most of us, the words ‘coronavirus’, ‘furlough’, ‘social distancing’ and ‘covid-19’ had never passed our lips… in fact, the biggest topic this time last year was still Brexit (who’d have thought a bigger news story than Brexit would come along!).
But 2020 has been a year unlike any other. Even if you haven’t been directly affected by Covid itself, what with home schooling, furloughing, lockdowns and social distancing, it’s fair to say that we’ve all had a tough year. And, in spite of the recent announcement of a relaxation of the rules for 5 days over Christmas, it does mean that the run up to the festive season is going to hugely different to any other year. Whereas December would usually be full of Christmas parties, lunches and after work drinks, obviously this year things have to be different.
BUT… in our opinion, that doesn’t mean that you should let December slip by without celebrating with colleagues. For some companies, with staff working from home, it may be months since they last saw their employees, and whilst you may not be able to celebrate in person, there is plenty that can still be done to spread the festive spirit. So, in this blog, we look at the staff entertainment allowance, and how it can be used in to try and extend some festive (socially distanced!) cheer.
Is there a limit to how much I can spend?
HMRC will provide tax relief on up to £150 per person per year. This can also include partners of employees.
Provided you follow the rules, your limited company will receive corporation tax relief on the expense, and it will not be treated as a benefit in kind (meaning employees will not have to pay additional tax/NI).
So, what are the rules?
• The event must be open to all members of staff.
• The £150 can cover multiple events throughout the year, again, provided the total amount spent doesn’t go over £150/head. So, you could spend £50/head on a summer event for your staff, and then later in the year £100/head for a Christmas event.
• If the £150 limit is exceeded, even by 1 penny, the whole amount will become disallowable and therefore treated as a benefit in kind for your employees, meaning additional tax and NI will be due.
• The £150 is VAT inclusive and also includes any extra costs such as travel and accommodation.
• The primary cause of the event must be to entertain employees. The total cost will be disallowed for tax if it is found that entertaining customers is indeed the primary function.
As with all company expenses, receipts must be retained.
How social distancing affects this
Usually, of course, this staff entertainment allowance would be spent on perhaps a night out for all employees, a Christmas lunch for the office and/or some after work drinks. But with none of this possible in 2020, that doesn’t mean that you should let the staff entertainment allowance go to waste.
Of course, if your company is only small, then you may still be able to go to a restaurant for a meal together (tier dependant and obviously whilst observing social distancing).
One substitute for the office party could be taking part in an online event. A number of companies that usually specialise in professional Christmas parties have now adapted their offerings to be virtual. This may include quizzes, music acts and virtual classes you can all take part in (for example, virtual cocktail making or cookery classes where all employees are sent the ingredients prior to taking part). You could also arrange for a hamper of festive treats to be sent to each employee for them to enjoy at the same time.
So, whilst Covid-19 has meant that our Christmas’ are all looking rather different for 2020, don’t let that stop you getting in the festive spirit with your employees. Heavens knows we could all do with a bit of a pick me up!
PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.
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