Party Time: Trick or Treat!
Will you owe any tax?
POSTED BY JONATHAN VOWLES ON 29/10/2019 @ 8:00AM
Christmas is approaching fast, so for many businesses, it's party time! But what does it mean for you, your employees or your business? What are the rules?
It's party time! Just ensure you stay within the limits and you won't owe any tax!
copyright: yeko / 123rf
A staff party or an annual function qualifies as a tax-free benefit for your employees providing that you meet the following conditions:
The event, whatever time of year, must essentially be for entertaining staff and must be offered to all staff, regardless of whether they attend or not. It should not be purely for the directors (unless all the staff are directors).
The total cost must not exceed £150 per head, per year. So, there can be various parties in the year at £50 per head! To work out the cost per head, do a headcount of employees, ex-employees and their immediate family and then divide the cost by the numbers attending.
£150 includes VAT, plus any extra costs such as transport and accommodation.
The £150 is a limit and not an allowance; if the cost is £151, the whole benefit is taxable. If you had more than one party for the year at say £75 per head for a summer party and one at £80 for a Christmas party, then the £80 will be covered under the exemption and the additional expense of the summer party will be taxed under a P11d. If your party exceeds the £150 limit and your staff are taxable then you may want to consider a PAYE and settlement agreement so that your staff do not need to pay additional tax themselves.
The cost of the whole event is an allowable expense for your business. It should be shown in the accounts as staff welfare.
You can claim back input VAT, but this may be restricted ie where you are also entertaining customers.
Does your annual party sound like a trick when you want to provide a treat?
Until next time ...
Would you like to know more?
If you're planning a celebration for your employees this party season, and want to check your tax position, then do give me a call on 01234 752 566, leave a comment below or click here to ping over an email and let's see how I can help you.
About Jonathan Vowles ...
I've been an accountant in and for business since 1987 and have a wide experience of consultancy, audit, accounts, taxation and wealth planning work from individuals and small businesses to multinational corporations and charities.
My eclectic interests in growing and developing business span a number of areas, which can be summarised as strategic business advice and tax saving advice.
I have worked with the Chamber of Commerce to deliver courses for people about starting up in business and have lectured about tax for a major accountancy practice and for Milton Keynes College.
I relax by reading fiction and by getting away from the office in a campervan.
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