The Christmas Party Benefit
A festive benefit available to Directors is the annual Christmas Party.
Providing certain conditions are met, HMRC allow limited tax relief for the cost of holding an ‘annual event’ for your company.
As a Director, you are entitled to provide the ‘Annual Event’ for yourself, your partner and any staff you employ and reclaim the costs up to a maximum of £150 per head (including VAT).
The event must be an actual ‘event’, i.e. you cannot just make a cash claim of £150 per person and open to all employees to attend. Costs can include transport, food and drink and accommodation. Receipts should be provided for the event to substantiate the costs per head.
To calculate the cost per head, add all the costs up and divide by the number of people attending (including non-employees), to give the apportioned cost per head.
Outside of these conditions, staff entertainment is considered a benefit in kind and Directors and employees would need to pay tax on the benefit.
VAT is reclaimable for the event for staff only (not partners or former employees) as long as the Director attends the event with the staff. If not, then HMRC do not deem this to be recoverable input.
You can find full details about the annual event guidelines here
If you wish to give gifts to your employees, then cash and vouchers are taxable, but gifts such as a Turkey, an ordinary bottle of wine, or box of chocolates are considered reasonable by HMRC and do not attract benefit tax for the employee (although your employee may not necessarily be over the moon with a turkey, so do check with them first!)
If the gift is more than £50 per head, HMRC would expect the benefit to be included on the P11d as a taxable benefit.
What’s the Bottom Line?
Keep the receipts for the annual event, make a note of who attends and how the apportionment per head was calculated. Choose gifts with a low value and keep it simple.