Claiming Christmas Parties Allowance Expenses

With Christmas fast approaching, we thought we would let you know about a little known tax loop hole regarding Christmas parties…..

HM Revenue & Customs allow a tax exemption of £150 per employee for Christmas Parties. So an employer can spend up to £150 per employee without having any tax burden on the employee, or business, whilst still claiming a deduction of the full amount for corporation tax.

There is no restriction to the size of business so this exemption applies even if you are the only employee, or if the total employees are made up of you and your spouse! What’s more, it stretches to guests meaning your spouse or partner can come along too – tax and NI free!

A ‘Christmas party’ does not necessarily have to constitute a party; it could take the form of a meal or stopover in a nice hotel. However, care needs to be taken when working out the total cost per head that it stays under the £150 per head tax exemption. If the cost per head exceeds this exemption by £1, then the full amount becomes a benefit in kind for the employee and therefore tax and NI would be due.

The cost per head is the total cost of:

    • the party/function and
    • any transportation or accommodation incidentally provided
    • Divided by the number of people attending.

It is sometimes hard to know in advance what the total cost per head will be (for example if you have not factored in after dinner liqueur etc), however there is an easy way to avoid this:

    • the restaurant/hotel etc should be booked in the company name and if there’s a danger of the £150 limit being exceeded the director should be authorised to pay the bill personally and claim back only up to £150 per head from the company – supported by receipts.

If this is something of interest to you, please feel free to contact us with any further queries you may have regarding the above.

More Blogs

Do I need an accountant as a sole trader?

Sole trader accounting can sometimes be simple: some sole traders may well find that they have no need whatsoever for an accountant. However, accountants for sole traders are an incredibly useful resource that can save you a great deal of hassle and time – and potentially even money. If you’re asking yourself, “Do I need an accountant as a sole trader?” – read on. In this blog we cover the ways in which accountants for sole traders can help, as well as how to choose the best sole trader accounting firm for your needs.

Accounting Team

Do I need an accountant If I am self-employed?

It’s not a legal requirement for those who are self-employed to use the services of an accountant. However, working with self-employed accounting professionals who understand the unique needs of the self-employed can often save you time, money and stress. Read on to discover more about the accounting needs of the self-employed, common accounting challenges you may face, and when working with an accountant makes sense.

Accounting Team

Do I need an accountant for my small business?

If you’re a small business owner – or looking to start a small business – you may be tempted to handle the accounting side of things yourself. You may think that this aspect of the business will be simple when you’ve started small…but is this really the case? In reality, small business accountants can save you money. They’re a trusted partner for a range of things, from planning and setting up your business to financial management, tax obligations, business growth strategies and more. Read on to find out how small business accounting services could improve your chances of business success…

Accounting Team