‘Can the work Christmas party be claimed back as a business expense?’
Knowing which work-related outgoings can be classed as a business expense can be bit of grey area for companies to understand.
One area that many businesses aren’t always too clear about is whether or not they can class their work Christmas party as a business expense.
HMRC does provide incentives for limited companies, but unfortunately not for sole traders. A 19% tax exemption via Corporation Tax on all festive entertaining costs is currently permitted, providing the:
- Party is an annual event
- Party doesn’t cost more than £150 (including VAT) per person
- Is open to all employees (and consists mostly of employees)
- Shareholders aren’t included in the exemption if they aren’t employees or directors
What’s more, it’s also possible for businesses to claim an additional £150 per person for a plus one for each employee, providing they are a family member or partner.
However, it’s important to remember that this is an exemption, not an allowance
So, if your party costs £151 (or more) per person, you cannot claim the first £150 as a business expense – the whole thing will be taxed as normal.
Many limited companies hold more than one annual event. Limited company contractors are free to do the same too. For example, you could choose to hold both a Christmas event and a summer function. Providing the total combined costs of each individual event do not exceed the maximum £150 per head, the tax exemption still applies.
If any individual event costs exceed this, then HMRC will only apply the exemption to expenses for the events that fall within the allowable limit.
For more guidance and support on whether your Christmas party is tax deductible or for general advice on business expenses, contact us on 01905 777600 or email@example.com.