In the next of our blog series focusing on the ‘All You Need to Know About…’ various different elements of running your own business, and with Christmas mere weeks away, today we are going to be looking at entertaining your staff during the festive period, and how it could end up helping your tax bill, as well as showing your employees how valued they are by you!
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.
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 with Christmas fast approaching, now is the time to get your party hat on and show your employees a bit of festive spirit!
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