Accountants are reminding employers that they are able to claim tax relief on their annual Christmas party – providing they don’t overspend on the sparkling wine.
Business owners are entitled to claim tax relief on social functions and parties for employees, as long as the events meet the necessary requirements.
If the party is an annual event and open to all employees, employers can claim back up to £150 per employee per year without it being treated as a taxable perk.
And if any one event costs less than £150 per head, you may be able to hold multiple events a year, as long as the total per head figure does not exceed the £150 limit.
Furthermore, costs can include anything from accommodation to food and drink to entertainment.
But it’s equally important to not overstep the £150 per person limit.
A penny over and HMRC won’t offer you any relief. Worse still, they will actually treat the whole amount as a taxable perk. That means you have to add Income Tax and employer’s and employee’s National Insurance Contributions (NICs) on top.
According to official HMRC guidance, you can divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.
Sarah Ghaffari, the ICAEW’s technical manager of SME business tax, said: “The Christmas tax exemption can be enjoyed by businesses of any size, so long as it’s within the £150 budget.”
Ghaffari added that any unused allowance can go towards a small Christmas gift.
“Bosses can now not only treat their employees to a tax-free Christmas party, but add a little gift to that as well.”