It’s that time of year, folks. Time for you and your team to let your hair down and celebrate the end of another unprecedented year. But before you open that champagne, make sure you know the incentives HMRC offers.
That’s right – HMRC offers certain exemptions when it comes to staff parties. So, you may not have to pay any Tax or National Insurance on your Christmas party expenses, providing you follow these rules:
- The business is a limited company
- The celebration must be open to all employees. If you have several locations, a celebration can be arranged for each site, provided everyone in the company gets an invite.
- It must be annual. This can include summer barbecues as well as Christmas parties
- The total annual cost per person must be £150 incl. VAT or less
- This can be extended to family members or partners of employees, if the cost stays below £150 incl. VAT per person
Exemption vs. Allowance
Now, it’s important to understand that an exemption is not the same as an allowance. Meaning that if the cost per head at your Christmas do is a lavish £151 or more, you’ll have to pay the Tax and National Insurance on the full £151. You’ll also need to make sure that all costs associated are exempt and keep a track of your spending, especially if you do several staff parties a year.
What about virtual Christmas parties?
These rules don’t just apply to your traditional, in person events. Virtual parties count, too. How would you spend £150 per person on a virtual event, you ask? Maybe you’ve arranged some form of entertainment – a quiz, or musician. As long as any costs can be proven to be for the party, you can include them.
How to record your party expenses
It’ll come as no shock that you will need to prove your spending. Whatever your plans, keep a record of at least:
- Number of people in attendance, and
- Cost per head
Costs can include things such as food, drinks, entertainment, venue hire, even travel and hotel costs.
Need more clarity? Get in touch with us today, and our friendly team will answer any questions you have. We’re here to help you save time, money and effort.
And above all else, have a wonderful Christmas and a Happy New Year!