As a business owner, it is only natural to consider things from a financial perspective. One example is planning your Christmas party. While many prioritise the enjoyment of the party itself, understanding these financial implications can help you make the most of your budget and even enhance your festive celebrations.
The Christmas party qualifies as tax free subject to certain criteria:
It must be open to all employees (whether they choose to attend or not)
It must be an “annual event”. A one-off event for example to celebrate 10 years of the business does not qualify.
The cost must be £150 or less including VAT and any additional costs of related travel and overnight accommodation. Note this is a threshold and not an allowance, and is for the entire year! You cannot simply take £150 from the business! If the cost works out at £151 per head, the whole of the cost is taxable, not just the excess over £150.
Please also remember that the entertaining of staff is tax-deductible – the entertaining of non-staff such as employee guests such as customers and suppliers is not tax deductible.
Staff will not take too kindly to having to pay tax and NI if the threshold is exceeded, but it can be dealt with through a PAYE Settlement Agreement whereby the employee picks up the cost of the tax and NI. Be aware though this adds to the cost.
Please call us now to find out the best financial solution for your Christmas party.
