While some might complain about Christmas paraphernalia popping up in the shops earlier and earlier each year, the tax-savvy will tell you that planning ahead for the Christmas party is vital if you want to avoid giving HMRC an unplanned and costly gift.
The annual celebration is a time to relax and to toast the successes of the year.
And it is perhaps an opportunity to get reacquainted with colleagues on a more personal basis, after a year of simply nodding to them on the way in to the office, then again as you leave for home.
It is the big work event we all look forward to, but there is no reason HMRC should look forward to it as well. The savvy party planner can make sure the festive bash isn’t a neatly-wrapped gift to the taxman.
Entertaining your employees can be allowable for tax relief in your business accounts, and it is relatively simple to ensure your Christmas party is eligible, by following some simple rules.
Martin Hudson, director at one of South Wales’ leading chartered certified accountants, Morgan Hemp, explains: “An annual event, such as a Christmas party, which is open to all staff and which costs less than £150 per head is a qualifying event as far as HMRC is concerned, and it will not be a taxable benefit for your staff.
“The good news is that this applies to companies of all sizes – whether you are an SME or a large conglomerate. And since the rules cover cost per head, you are free to pay for partners and spouses without the employee facing a benefit-in-kind charge. It is the cost per head that’s important.”
However, there are conditions that must be met if you want to avoid a tax hangover the morning after.
The £150 exemption covers all costs including VAT, accommodation and transport.
The £150 is an exemption and not an allowance. And if you exceed the £150, then the full amount then becomes taxable, not just the excess above £150.
Your party must be open to all employees too.
Martin warns: “If any of these three conditions aren’t met then the cost of the meal or event becomes taxable in full on the employee.”
For more detailed advice, contact an adviser at Morgan Hemp on: 01792 466428 or go to the website at: www.morganhemp.co.uk
For further help the Morgan Hemp Tax Tools App is on hand, available from the iTunes App Store and Android App Store, to help you to simplify your daily taxes.