Annual parties and functions

It’s that time of year again, it has been planned for months and everyone is excited to see which member of staff is going to make the most of the booze budget – yes, it the Christmas Party!

But as a company owner, when the glitter has settled in the hoover bag and it is time to sort out the accounts, what must you think about?

Is this a staff party?

If the party is primarily for entertaining staff, that’s fine.  The party must be open to all staff, not just directors, in the location in question.  There will be no benefit in kind for staff if the party is within the limits.

What are the limits?

  • If the total cost of the party, including VAT, travel and accommodation, exceeds £150 per head, the whole amount is taxable on the employee and the employer will pay national insurance on the benefit.  Under this amount and no benefit applies.
  • If there has already been a summer function, then the cost of this must be taken into account as the £150 is per annum, not per function
  • You can use the limit against one function. For example, if the Summer Ball costs £85 per head and the Christmas Party costs £160 per head, then only the Christmas Party will be taxable in full.

Can I claim back the VAT?

Yes.  But, if there was an element of entertaining UK clients, then the proportion relating to these guests is disallowed.

If your staff are there to entertain the clients, the whole amount of VAT is disallowed.

Is it allowable for Corporation Tax?

Yes. The full amount of the party, even if above the £150 limit for staff, is allowable, unless it is deemed to be entertaining clients.

Call us on 01753 869549 if you wish to discuss your concerns or clarify any points raised.