Staff Christmas parties are looming – but Shropshire business owners could find they bring unexpected tax benefits.
Francesca Hutcheson, Dyke Yaxley’s Tax Director said rather than dreading the annual festive get-together and the potential drama it could create, company bosses should look at the positives.
“If your business employs staff, it’s likely that you’re planning some kind of Christmas gathering, and throwing a staff party is a great way to end the year and reward everyone’s hard work.
“And if your business is a limited company, and your event meets certain criteria set out by HM Revenue and Customs, you could even find the party may be tax-exempt.”
Francesca said the good news was that the exemption could apply not only to your Christmas party, but to any annual event you hold for your staff.
“To qualify for the exemption, the cost of your party must come to less than £150 a head – and that’s for everyone who attends, including non-employees. It’s important to remember that this figure is an exemption and not an allowance. If the cost of the event comes to say £151 per person, the full amount would be chargeable and not just the £1 over the limit.”
Francesca said to qualify, the event had to be something that happens annually so a one-off event for your business’s 20th anniversary or to celebrate winning a new contract would not be exempt.
“The party also has to be available to every employee in your company, so it won’t qualify if you hold a directors-only dinner or a social event for one department.
“If your business has several locations, or if your workforce is organised into distinct departments, you can hold separate annual parties, and as long as everyone has the option to attend from somewhere, each party could be exempt.”
If an event doesn’t qualify for the exemption, business owners will need to report it on each employee’s P11D form and pay class 1A National Insurance contributions on the full cost of the event.
“Even for events that are exempt, you’ll need to make sure you keep detailed records in case HMRC need to check what you’ve spent.”