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Thursday, 04 December 2014 15:05

Don't invite the taxman to your Christmas party

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‘Tis the season to be jolly and if you haven’t already done it, you’re probably in the process of arranging your Christmas party. So what better time is there to familiarise yourself with the tax rules regarding entertaining, staff functions and Christmas parties?

As an employer, you’ll have certain reporting obligations when providing social functions and staff parties. However, what you need to report and pay depends on:

  • If its an annual event
  • If its open to all of your employees
  • If it costs more than £150 per head
  • Whether the employee is a director 

It’s possible that you may not have to report anything to HMRC or pay tax or National Insurance. So what’s exempt? 

In order to be exempt, your party or staff function must: 

  • Cost less than £150 per head
  • Be an annual event – such as a Christmas party or a summer BBQ
  • Be open to all of your employees

However, if your business operates in more than one location, an annual event that’s open to all staff based at one location is still exempt. You can also put on multiple annual events and as long as the combined cost of the event is no more than £150 per head, they still count as exempt! 

It’s important to note that for VAT purposes, the definition of employees does not include partners of existing staff or former employees. Therefore, if you’re party includes guests, you will need to apportion the relevant costs appropriately for VAT. However, the £150 per head applies to everyone who attends your event and not just staff. 

What if my event isn’t exempt? 

Any events you provide that aren’t exempt will need to be reported to HMRC on form P11D and National Insurance will have to be paid. 

You may be able to count the costs of any events that cost less than £150 per head as exempt – unless you’ve already used up £150 limit on a previous event. However, if your party costs more than £150 per head, the whole amount becomes taxable and not just any costs over the £150 exemption. 

What if I’m a director? 

If you are the director of a company with no employees, the issue of reclaiming VAT becomes more difficult. 

When an event is provided only for directors, you cannot reclaim the VAT. However, when directors attend parties with other members of staff, then you can reclaim the VAT. 

What if I want to give my employees a present this Christmas? 

If you’re planning to give your employees a present this Christmas then there are a few things to be aware of. Firstly, any present paid in cash will always be taxable; this also applies to vouchers. 

If you give your employees a seasonal gift such as a bottle of wine, a box of chocolates or a turkey, as long as the cost is ‘reasonable’, HMRC won’t tax it.

 

Disclaimer

The information contained in this Blog is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. The application and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations, and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies in information contained in this Blog. Accordingly, the information on this Blog is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax, or other professional advice or services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser.

While we have made every attempt to ensure that the information contained in this Blog has been obtained from reliable sources, One Plus One Ltd is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this Blog is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Nothing herein shall to any extent substitute for the independent investigations and the sound technical and business judgment of the reader. In no event will One Plus One Ltd, or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this Blog or for any consequential, special or similar damages, even if advised of the possibility of such damages.

 

Read 908 times Last modified on Wednesday, 05 October 2016 16:31

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