The annual company Christmas party is a great way for employees to come together and celebrate the festive season and the last 12 months achievements within the business. Organising a party as a business owner will come with many questions, from what venue to use, the food you want to serve to what is a limited company’s Christmas party claim allowance.
If you are a limited company, good news! Though it’s not an allowance, HMRC provides tax relief to help you reward your employees and their partners with an annual event. This can include both Christmas and Summer parties.
There are some rules and restrictions imposed by HMRC which must be met for you to offset these costs:
- The cost per head must not exceed £150 including VAT per head or less per year.
- The event must be available for all employees to attend.
- The event must be annual by nature – this can be a Christmas or summer event or both.
What can the £150 cover?
- The £150 can include – food, drink, transport, hotel accommodation, even entertainment.
- When planning, it’s important to remember that the £150 is NOT an allowance and only costs up to this amount can be included to be reclaimed. If your part costs £151 or more per person, you won’t be able to claim the first £150 as a business expense – the whole thing will be taxed as normal.
Can I claim partners/guests of an employee?
- If you extend the event and allow employees to bring a plus one, you are also allowed to claim £150 for them as well.
- The easiest way to (find the total) you can spend on your annual Christmas do is to work out how many attendees there will be (including any plus ones) and multiply that by £150.
- E.g. Your business has 6 employees, including the director and each brings a guest. That is a total of 12 people at the party, as long as the bill doesn’t exceed £1,800 (including VAT) it can go through your accounts as an allowance expense.
Can the £150 be split across multiple events?
- Yes, it can, as long as the total of the two events is £150 per head or below.
Do the same rules apply to virtual/online parties?
- Yes, if planning an annual in-person event is unrealistic and you want to host an event virtually, and all other conditions are met, then the exemption applies.
Can we use the £150 for a Director Only Christmas party?
- No, as the party is not open to all employees, this would not be exempt for tax purposes.
Can I claim back the cost if I am a one-person limited company?
- Yes, you can claim for yourself and a partner up to £150 each for a Christmas get-together.
Important Points to Remember
- The £150 is not an Allowance but the amount you can claim tax free per employee and guest
- The £150 INCLUDES VAT, always check invoices so you’re not surprised
- Employees are allowed a plus-one
- The event must be annual
- All employees must have the option to attend
For more information about the limited company’s Christmas claim allowance, or help ensuring that your Christmas party stays within the allowance get in touch with CPL Accounts today.