For many, Christmas is a respite, a time to unwind. Yet, for us business owners, it's not just a season of relaxation; it's an opportunity to reward, express gratitude, and indulge in festivities. Fortunately, HMRC provides incentives though, as usual, the rules that govern tax relief claims for your Yuletide affairs are pretty strict.
Navigating the Festive Landscape:
Can I claim my Christmas party as a business expense?
Absolutely! Limited companies, not sole traders, can host and claim for a social event. It must be open to all staff, be an annual occurrence, and cost less than £150 per head over the tax year.
Caution: Exceeding £150 per person turns the whole cost into a taxable event as this is an exemption, not an allowance.
Can I give my employees a Christmas present?
'Trivial' gifts such as food, chocolates, or wine are allowable expenses, so can be given as gifts without being considered benefits-in-kind.
Limit: Gifts must be under £50, not cash or vouchers, unrelated to work performance, and outside contract terms.
Can I send gifts or Christmas cards to clients?
Definitely, but to be reclaimable, costs must be under £50 and they must have very clear advertising on them.
Note: Consumables like food and drink are not tax-deductible.
How does tax work for my employee’s Christmas bonus?
Christmas bonuses count as income and go through payroll, subject to regular tax and National Insurance.
Exemption: Non-cash long-service awards for staff with at least 20 years of tenure are tax-free, provided they are valued under £50 per year of service.
Strategic Spending and Compliance:
More Than One Staff Party:
Allocate the £150 per person exemption across all events in the year. Flexibility is key!
Inviting Clients or Subcontractors:
Business entertaining isn't allowable for tax relief, so costs incurred won't reduce your tax bill.
Partners at Christmas Parties:
An exemption is granted for a plus one, be it a family member or partner, allowing an additional £150 exemption.
Whatever you decide to do this Christmas, we hope you have a good one, and make sure to spread the joy and gratitude to your staff and customers!