This is a time of the year when your staff will usually be looking forward to the firm’s annual Christmas bash. With the current COVID restrictions, this year will be a little different but we thought it might be timely to provide some information about the best way to organise events without falling foul of HMRC.
December usually gives us an excuse to let our hair down and enjoy a well-earned celebration with our work colleagues and partners. The cost of an annual staff party or similar function is allowed as a deduction for tax purposes. However, the cost is only deductible if it relates to employees and their guests, which would include directors in the case of a company, but not sole traders and business partners in the case of unincorporated organisations.
Also, as long as the criteria below are followed there will be no taxable benefit charged to employees:
If the £150 limit is breached employers can pick up the tax cost by using a PAYE settlement agreement.
VAT input tax can be recovered on staff entertaining expenditure. If the guests of staff are also invited to the event the input tax has to be apportioned, as the VAT applicable to non-staff is not recoverable. However, if non-staff attendees pay a reasonable contribution to the event, all the VAT can be reclaimed and of course output tax should be accounted for on the amount of the contribution.
If you have any questions about anything covered in this brief guide, please don’t hesitate to get in touch with Charles Green on 020 8652 2450 or email firstname.lastname@example.org