Christmas party

[Mattonella Tile Studio]

It's getting to that time of year again so I figured I'd better get organised.

What I propose to do is to take some cash, go to a restaurant and use the cash to pay for the meal and drinks for xmas outing.

Attending will be 2 directors, 1 employee, employees husband (non employee).

What is the amount that HMRC will let me take for this outing? Will they let us include non employee if we each give him some of our allowance? What documentation do I need to keep (receipts etc)?

Yours festively.

 

[Alpha]

You are allowed to spend £150 inc vat per person attending (employees and partners) annual functions without any tax implications on the employees. They do not neccessarily have to be just a Christmas party but can be say a theatre trip in the summer, the main proviso is that it must be available for all employees to attend even if they choose not to.
If this amount is exceeded then the total of the amounts that exceed the threshold will be taxable on the employee. (It is not the difference between the spend and £150 eg if you go to a summer thatre trip costing £50 per person and then spend £110 per person on a Christmas outing the amounts charged to tax is £110 not £100.

Obviously you need to keep receipts for these functions but also a record of who attended would be appropriate.

 

[Mattonella Tile Studio]

Thanks Alan - I wasn't intending to take £600 so we'll be ok.

Do HRMC let you reclaim the VAT?

 

[Alpha]

Thanks Alan - I wasn't intending to take £600 so we'll be ok.

Do HRMC let you reclaim the VAT?

Yes for staff entertaining....No for customer entertaining.

 

[KidsBeeHappy]

Yes for staff entertaining....No for customer entertaining.

OK that interests me!

Nasty woman from HMC&R Vat side disallowed a proportion of my husband's subsistence costs on the basis that it had an alcholic drink on it. He was therefore "enjoying himself" and not working. Therefore not a business expense. (Sole trader). Was she wrong?

 

[Alpha]

OK that interests me!

Nasty woman from HMC&R Vat side disallowed a proportion of my husband's subsistence costs on the basis that it had an alcholic drink on it. He was therefore "enjoying himself" and not working. Therefore not a business expense. (Sole trader). Was she wrong?

Technically speaking I would say she was correct but I would be amazed if she picked up the odd drink on subsistence and made a point of disallowing it.....seems extremely petty and she may have been desperate to pick up on something. (Now if it had been a bottle of wine on everytime he was away!!!).

We have had no problems with a a drink when partof a meal in the past. we did have copious cans of red bull queried with an IT client however he needed them to keep going (which they readily accepted)

Edit....I'm sure that one of the vat experts will be able to give the HMRC viewpoint.

 

[KidsBeeHappy]

She did actually go through the receipts to find the ones with an alcholic drink on. Hubby does a lot of driving, so the receipts were for the evening meal on the overnight stops and it was only ever one drink per person.

I KNEW she was just being picky. We just didn't get on!!

 

[Alpha]

She did actually go through the receipts to find the ones with an alcholic drink on. Hubby does a lot of driving, so the receipts were for the evening meal on the overnight stops and it was only ever one drink per person.

I KNEW she was just being picky. We just didn't get on!!

Was this the bit she picked up on?

Was there an element of customer entertaining?

 

[Alison Jones]

Hi Alan

Do you know if the £150 per person counts for Company Directors who are also employees of the company even if they don't have any other employees and if this can be put through the books as a business expense?

I am setting up a Limited Company with my husband and should have premises before Christmas but not sure whether we will have got staff by then.

Would be good if we could spend up to £300 for a meal out and be able to put it though the books without upsetting the tax men.

Thanks

Alison

 

[KidsBeeHappy]

Was this the bit she picked up on?

Was there an element of customer entertaining?

Nope, the receipts were obviously meals for one, one main, one pudding, one pint. Apparently - that's "enjoying yourself", hers must be a fun household!

 

[i234i]

Nope, the receipts were obviously meals for one, one main, one pudding, one pint. Apparently - that's "enjoying yourself", hers must be a fun household!

i think shes in there somewhere..

 

[Kevin Hall]

Do HRMC let you reclaim the VAT?

The Ernst & Young case on this issue succeeded against HMRC because the non-employees made a nominal contribution to the cost of the meal.

So, if the non-employee(s) attending the meal paid a few quid to the business, the VAT on the cost of the whole meal should be recoverable by that business.

Hope that clears up the VAT issue?

 

[yorkshirejames]

Kevin,


Could the non-employee simply buy a round of drinks (and keep the receipt, so it could be proven to HMRC if needed)?

 

[Kevin Hall]

Hi James

I've never come across that. I suppose it depends on the arrangements, but I wouldn't recommend structuring things in the way you describe.

HMRC were not too happy about the E&Y decision anyway, so it might be more sensible to be as close to E&Y as possible. In other words, the non-employee should pay "a couple of drinks"-worth of funds to the business. Though it might be one way to sell the cost to the non-employee.

But to have the non-employee pay the funds other than direct to the business (i.e. to the caterers/barman instead), seems to circumvent the point - namely that the non-employee is paying for the entertainment he receives from the firm (the firm makes a VATable supply) and is not receiving a free entertainment (non-business supply by the firm, blocking input VAT). This is how I understand the principles - it is open to review by others.

But I think I see what you are aiming at: call the payment for the drinks (receipt to prove payment made by non-employee) a payment to the business, which in turn asks the non-employee to pay not the business direct, but the caterer, in order to settle part of the business liability to the caterer. It just seems needlessly complex and invites a VAT Officer to question it all, whatever the underlying legal web of contracts!

Clear as mud?

 

[elaine@cheapaccounting]

Hi Alan

Do you know if the £150 per person counts for Company Directors who are also employees of the company even if they don't have any other employees and if this can be put through the books as a business expense?

I am setting up a Limited Company with my husband and should have premises before Christmas but not sure whether we will have got staff by then.

Would be good if we could spend up to £300 for a meal out and be able to put it though the books without upsetting the tax men.

Thanks

Alison

yes you can have £150 as a director / employee. i.e. for each employee

 

[MrPAYE]

Back on topic

Just be careful that any xmas party or other 'do' is actually held annually, i.e. every single year, otherwise the £150 exemption does not apply.

A number of employers have been caught out with this in the last couple of years - cancel xmas party because of the recession then lo and behold HMRC come along and challenge there is no annual party !

Also, watch out re incidental costs such as travel, accommodation etc to attend the meal or whatever. These all need to be included in the costs when considering the £150 limit and all VAT must also be included.

Article done on this a few weeks ago here

 

[MrPAYE]

Oops, just realised this is a very old topic that has been brought back to life by one of those pesky spammers - the spam post now having been deleted making it look like it was me to blame

Oh what I would do if I was in the same room as those idiots who spam forum like this

 

[elaine@cheapaccounting]

I thought you were having a party for one there