Christmas Party and the Tax man
Published on 13 December 2013
As the works Christmas party season is now well underway I thought it would be a good time to remind you of the limit HMRC put on the value of the party to ensure that the tax man doesn't also enjoy your party as well.
HMRC have a tax and NIC-free annual allowance of £150.00 per person. This £150.00 is the total cost of the function (food, drinks, entertainment, transport, accommodation and VAT) divided by the number of people attending. If after calulating this you find that the cost per person is more than £150 each individual member of staff will be taxed on the whole of their average cost.
The cost is only tax deductable for employees and their partners, so if you invite business partners they must be excluded from the calculation.
You are allowed to claim this allowance over more than 1 party during the year, eg if you reward your staff every few months by taking them out for a meal, but you must remember the £150.00 is the total annual allowance.