With just 85 days until Christmas, it’s a good time to remind you about deductible expenses for festive and annual events. It’s the ideal moment to ensure you can maximise tax deductions for your Christmas party.
One common perk for employees is the company Christmas party, where the whole team comes together to celebrate. However, there are a few important things employers should keep in mind to ensure this perk doesn’t become a taxable benefit for employees.
Understanding the Tax Exemption for Annual Functions
Here’s what you need to know about the tax exemption for annual functions, up to £150 per person:
- It’s an exemption, not an allowance: You must spend the money to claim it, and if you don’t use it, it’s lost.
- Applies per person: The exemption is per person, not just for employees. This means partners, children, and guests can be included.
- Inclusive for all employees: The event must be open to all employees, not just a selected group. Even if you’re a sole director with no employees, you can still take advantage of this exemption.
Applying to Multiple Events
This exemption covers ‘parties and functions,’ meaning you can hold more than one event in a tax year. Key points to remember include:
- Single Event Cost: For a single event, the cost per person must not exceed £150.
- Multiple Events: For multiple events, such as a summer BBQ and a Christmas party, the total per person must stay under £150 across both.
- Excess Costs: If the cost exceeds £150 per person, even by just £10, the entire amount becomes taxable as a benefit in kind, with an additional employers’ National Insurance charge.
Corporation Tax Deduction
Your limited company can also claim these festive or annual parties as deductible expenses for corporation tax purposes. The costs associated with entertaining employees, as long as they’re not incidental to entertaining others, are deductible. This way, you can maximise tax deductions for your Christmas party or any other annual event.
By keeping these tips and rules in mind, you can ensure that your company’s festive and annual events are both enjoyable and cost-effective. If you need further assistance or have any questions about tax-deductible expenses and how to maximise tax deductions for your Christmas party, contact us at BAS Associates Ltd. Happy holidays and merry planning!
