It’s December already – the advent calendars are out, and we’re getting really, really excited for Christmas. But, the big question for many business owners is: “Can you claim tax relief on the work Christmas party? And is it tax-free for the guests?”

We asked one of our team, Billie Arnold, to record a video on this. You can watch it here, or read about it below.

Well, even the taxman has a little bit of Christmas cheer, so the basic rule is Yes! The costs of the staff party are eligible for tax relief and tax-free for the staff. However, there’s a limit to his generosity – the cost per head must be less than £150.

This is actually pretty generous, but you do have to be careful as, if you go a penny over the £150, none of the cost gets tax relief, ie you even lose the relief on the first £150.

How is the cost per head calculated?

At its simplest, it’s the total cost divided by the number of guests. However, there are two important points to note:

  • The total cost includes all costs, ie to include the function itself plus any travel, accommodation and any other extras.
  • The number of guests isn’t restricted to the staff. If you have 10 staff and each brings a partner, there are 20 guests so you can spend £3,000.

Can I have more than one party?

Yes, you can. Up to a total per year of £150 per person. This can be split across a few events until you hit the limit.

As an example, you could have three parties costing £70, £70 and £60. The first two are OK as they total £140. However, the third isn’t allowable for tax as it goes through the £150 limit. For each event, it’s all or nothing – the £60 event is entirely disallowed. You can’t claim the first £10 and disallow the rest!

One more rule

One last thing – to be allowable, the event must be open to all staff (or at least all at a specific location).

What happens if I go over the £150 limit?

If you do go over the limit, the staff can be taxed on the value as if it’s part of their salary. Alternatively, the employer can choose to pick up the tab.

Any questions?

If you’d like a meeting or a Skype call to discuss this, please get in touch with your favourite Liverpool accountant