The 19th July has been labelled by some as ‘Freedom Day’. As we largely say (a cautious) goodbye to social distancing and masks, for many, it is the chance to go back to some sort of normality that hasn’t been seen since pre March 2020.
And whilst many companies have, and still continue to, embrace working from home, they may now be starting to think about ways to bring their employees back together, to help boost morale and rebuild some of the working relationships that have essentially been carried out over email and Zoom during this past year.
So, in this blog, we look at the staff entertainment allowance, and how it can be used to help bring your business back together as we tentatively take our first steps back to ‘normality’.
How much can I 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 below 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).
• The £150 can cover multiple events throughout the year, provided the total amount spent doesn’t go over £150/head per year. So, you could spend £50/head on a summer event for your staff, and then later in the year £100/head for a Christmas party.
• The event must be open to all members of staff.
• 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.
So, with life (hopefully) starting to return to normal, and with the glorious weather that we are (currently) having, why not get your ‘summer shindig’ planned today, and save some corporation tax along the way!
PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.
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