After the rather mellow affair of Christmas 2020, with lockdowns, social distancing and masks aplenty, here’s hoping that Christmas 2021 will be a much more traditional celebration, with socialising aplenty. And, after the couple of years we’ve all had, now is certainly the time to show your employees how valued they are by you, and help inspire a bit of work place bonding again, after many employees have been kept apart by working from home.
In this week’s blog, we take a look at not only how you can show your employees your appreciation and spread some Christmas joy, but also how you can save the company some tax in the process!
How much can I spend, and what tax relief will the company get?
HMRC will provide tax relief on up to £150 per person per year. This can also include partners of employees.
Provided the amount does not exceed £150/head, 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). This means that your corporation tax bill will be reduced by 19% of the allowable amount that you spend on staff entertaining for the year.
Sounds too good to be true- what’s the catch?
Well, not a catch as such, but of course there are some rules (there’s always rules when it comes to tax!):
• 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 Christmas party for your staff, and then later in the year £100/head for a summer 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.
So, provided no unexpected lockdowns are imposed just before Christmas again(!), now is the time to get planning that Christmas do and make up for lost time!
PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.
We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.
Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.
We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.
To find out how we can help you please get in touch now.
