Christmas party season is fast approaching and if you’re a business owner and you employ staff you’ll want the tax relief you’re entitled to when it comes to a Christmas party. Remember if you claim too much you’ll receive a penalty, and we don’t want any of your events to end on a sour note so we’ve come up with a guide to ensure this doesn’t happen.
How much can I claim?
An event must follow certain criteria to be excused. Your event must be annual (like a Christmas party), the event must be open to all your employees to attend and finally it must cost £150 or less per head. This £150 per head limit covers the whole tax year, so it is £150 per head spread over all your company events in that time. If your party adheres to these criteria, you won’t have to worry about reporting anything to HMRC, or paying employer’s national insurance on your event.
I have two offices, what do I do?
If your business happens to be slightly larger, you may have two locations where staff work. You can have individual parties and still be exempt, as long as all staff from that location can attend and the other rules are adhered to.
What happens if my business has a Salary Sacrifice Scheme?
Your business may have a salary sacrifice scheme to help fund your events and parties. If this is the case, you do not need to report the worth of the event in relevance to each employee, to HMRC. However, this is only the case if you are already exempt from paying tax for the event.
What if I spent more than the allowance?
If you’re a generous employer, your party may not follow these rules. If this is the case you will be required to declare the staff benefit with the annual P11D form. In addition, you’ll have to pay 13.8% Class 1A NIC and your employee with be taxed on the benefit. If you’re using a salary sacrifice scheme and the cost of the event is any less than the salary sacrifice, you must report the salary amount instead.
Don’t forget that your staff are your biggest asset and that a little thank you every now and then goes a long way! Hopefully this guide has helped make the festive season a little less taxing – now you just have to worry about booking a table in time to beat the seasonal rush!