Before the Budget upsets the vibe, perhaps you want to get your Christmas activites and parties under way before next week. If not, let's hope this relief isn't affected!
So what employers can provide to staff and directors tax free? Parties, events and the new trend of activities such as axe throwing, giant jenga and crazy golf are included.
What are the tax free limits?
You can spend a maximum of £150 including VAT per staff member plus another £150 for a guest in total over a tax year. The main condition is that ALL members of staff at that location must be invited, so remember to include employees on zero hours contracts.
In addition to the £150 annual party limit, you may also send a gift to staff with a value up to £50 including VAT, such as a Turkey, wine or chocolates.
What is the tax treatment and accounting required?
The cost is fully tax deductible with no benefit in kind income tax or national insurance to worry about. Your staff will feel appreciated and you save 19%/25%/26.5% corporation tax. Ensure that the costs are called Staff entertainment or Christmas party in your Profit & Loss Account.
The £150 includes all costs such as travel and hotels. Divide the total cost of each function by the total number of people, including guests, to arrive at the cost per head.
The VAT is fully recoverable when paying for staff entertaining. If you make a small charge to your staff's guests and pay over a small amount of VAT, the VAT on the total cost for the guests is also fully recoverable.
Similarly, small gifts up to £50 are fully tax deductible and VAT may be recoverable if only one small gift is made during a year. Perhaps these costs could be called Staff welfare to help keep them separate from your £150 calculations!
The number of small gifts to staff in a year is unlimited, except that VAT is not reclaimable above £50 per employee. Gifts to directors of close companies, however, are limited to £300 a year (inc. VAT) and the same VAT reclaim limit applies (i.e. £50).
NB Ensure you don’t go over the £150 or £50, otherwise the entire amount is taxable.
I’m a director and don't have any staff. Can I benefit from this favourable tax treatment?
As you are the only director/employee you might think you can't have a Christmas party - wrong!
You can avail yourself of the £150 per head exemption as a member of staff (the only one!) and another £150 for your guest. You can also have a gift with a value of up to £50, but you’re likely to be restricted to doing this up to a total annual cost of £300 including VAT so check what other company gifts you’ve taken so far. We would advise that VAT can't be reclaimed.
Now you can have a fabulous tax subsidised Christmas activity or party !
If you need any further specific tax advice or just a chat about tax "stuff", please get in touch and we can set up a free call.
Rob Glover FCCA
Tel 07831 273471
https://robglover.net/
https://onthespottax.co.uk/tax-accountants/london-north-home-counties-accountants/rob-glover-fcca
I have over 30 years experience as a finance, accounting and tax specialist, both in the corporate world and in practice, and am a qualified accountant.
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