Did you know you can reclaim tax on the cost of your office Christmas party? It is not a very well advertised fact, but HMRC generously offer UK firms tax exemptions of up to £150 per person for the cost of a firm´s annual celebration providing certain rules are met.
The rules and regulations stipulate that the event must be a traditional event each that is held each year and with the promise to continue hosting such an event. It is also a requirement that every company employee is invited to join the celebrations which means you cannot claim expenses for individual teams, that remains as a gift for rewarding them for their achievements.
HMRC allow you to claim tax of up to £150 per attendee. That means you must keep a record of people you catered for rather than staff who do not go. However, if an employee declares an intention to attend but does not, and you have already paid for the catering you can claim tax. You will need physical evidence such as booking forms and receipts of payment.
Be wary of Christmas party tax exemptions
Tax exemptions for office parties are not as straight forward as they seem however. The £150 per person relief covers the entire year and not just Christmas. They also cover events and not strictly parties. Therefore if you stage a summer barbecue, the £150 has to cover both events.
You must also take care when claiming relief on your self assessment tax return form that you add party costs as an exemption rather than an expense. If you exceed the £150 limit per person you get nothing. The amount claimed has to be spot on £150 or below.
If you are a large company with satellite offices, you are entitled to hold separate office parties for each office. HMRC realize it is logistically impossible to get everyone together in a central location if you have multiple offices scattered around the UK.
The rules are also lenient by allowing claims for clients, partners and spouses. However, in order to do this you must show that the party was held principally for staff members. HMRC will take into account the number of partners may outweigh the number of employees, but if you submit a claim with 25 customers and only 10 employees the tax man will most likely turn you down.
How are you allowed to spend the £150?
HMRC again show some festive cheer by allowing event organizers to be flexible with how they spend the £150. Everything you require to host a party is refundable including travel, accommodation, entertainment, food and of course drink, so don´t be shy about getting the sherries in!
Entrepreneurs that run their own company have not been forgotten either. The law includes sole traders which means that you can take out your other half (or a client) and claim £300 for what could be a remarkable free meal!
If you would like further advice about tax exemptions contact Taxaccolega, an accountant in London, today on 08000 234 235 or email firstname.lastname@example.org.