Entertaining staff

[Newchodge]

I am sure lots of employers are planning their staff Christmas parties. I just wanted to start the seasonal thread about staff parties and tax.

As I understand it, if you throw a free Christmas (or other occasion) staff event or events to which all staff are invited, it is not a taxable benefit for the staff concerned, provided the total event cost is less than £150 per head. Similarly, giving staff a nice box of Christmas chocolates is also not a taxable benefit if it is under £50 cost.

The bit I keep forgetting about is - is it an allowable expense for the employing company?

 

[Ian J]

The bit I keep forgetting about is - is it an allowable expense for the employing company?

yes

 

[WaveJumper]

Forget the Christmas party what about my Christmas bonus ?

 

[japancool]

I wish I had entertaining staff.

 

[Ivel]

It is an allowable expense for the company, and there is no limit to how much the employer will spend, it is still an expense in the company accounts. The employer can also claim the VAT as it is considered to be staff welfare and not entertainment. What you need to remember is that the limit for Benefit in kind is £150 per head annually, so if you have a Christmas party and a summer dinner, each one of them is under £150, but both combined are going over £150 per person, and only one of the events will qualify for exemption. In other words, if you have a Christmas party for £120 per person and a summer BBQ for £90 per head, the total cost is £210, and only one of the events can be exempt. The other one should be reported on P11D.

 

[Bobbo]

Other thing to remember is that the £150 per head (and the £50 trivial benefit) limits refer to the VAT-inclusive cost. That the business may be able to recover the VAT is not relevant.

In respect of the above comment I would note that it is still entertainment - just it is employee entertainment, not business entertainment, and so the VAT is recoverable (see VAT notice 700/65).

 

[potato632]

For 1 person LTD companies (director withdrawing a salary and also dividends), you can expense staff entertaining for £150 per head for you (the director) and a plus one (a partner or family member) = £300/year?

 

[UK Contractor Accountant]

and a plus one (a partner or family member) = £300/year?

only 1?

what about friends & the self employed cleaner.

I'm holding a virtual Xmas party then if only 1

 

[potato632]

only 1?

what about friends & the self employed cleaner.

I'm holding a virtual Xmas party then if only 1

Not sure if you can do more than plus one! My dinners (erm, parties) aren't expensive even with 5 people

 

[Lucan Unlordly]

For 1 person LTD companies (director withdrawing a salary and also dividends), you can expense staff entertaining for £150 per head for you (the director) and a plus one (a partner or family member) = £300/year?

So if I stand a round of drinks at a business networking meeting, or meet with both my web guys at the same time, I can only claim a plus one?

 

[DWS]

So if I stand a round of drinks at a business networking meeting, or meet with both my web guys at the same time, I can only claim a plus one?

What you describe is not a Xmas party or an annual event, you can spend what you like on ‘entertainment’ but you will not get tax relief on it.

 

[Lucan Unlordly]

What you describe is not a Xmas party or an annual event, you can spend what you like on ‘entertainment’ but you will not get tax relief on it.

Ok, but is there a limit on what a sole trader can put through the books as an expense?

 

[DWS]

As a sole trader unless you have employees then any expense for entertaining is pretty pointless as it just gets added back for the tax calculations, slightly different for a Ltd Company where at least you will get the benefit of not paying tax on it personally

 

[Daybooks]

The other one should be reported on P11D.

Am sure that will please the staff. Better still enter into a PAYE Settlement Agreement (PSA) to prevent any burden on the staff.

 

[jamesrivera]

It is an allowable expense for the employing company, provided the conditions are met. The £150 per head rule is quite generous, as it can cover not only the Christmas party but also summer gatherings or other annual events, so long as the combined cost doesn’t exceed the limit. Many employers use this to reward staff in a tax-efficient way while still keeping morale high.

One thing to be mindful of is that if the total cost per head goes even slightly over £150, the entire amount becomes taxable, not just the excess. That’s where careful planning pays off. Some firms turn to specialists such as brightsparks.co to help them structure events and perks in a way that stays compliant while still being enjoyable for the team.

It can be worth checking with an accountant, especially if you’re combining events or adding in small gifts, to make sure everything remains within the exemptions.