Don’t forget your Christmas party tax breaks

Tax exemption available to businesses for Christmas parties

While Christmas might still be two months away, many businesses will already be planning their annual celebration. ACCA (the Association of Chartered Certified Accountants) is determined to bring a little more seasonal cheer by reminding all businesses of the tax exemption available for annual parties.

Employers can claim a tax exemption providing the cost of the event, including VAT, does not exceed £150 per head. It is important to note that this is a tax exemption, not an allowance.

Chas Roy-Chowdhury, ACCA head of taxation, said: “Christmas parties are a great way for employers to thank their staff for their work during the year, but what is less well known is that annual parties carry a tax exemption. However, there is a £150 per head limit, if the cost per head goes over £150, the whole cost, not just the amount above £150, becomes a taxable benefit in kind.

“All costs must be taken into account including taxis home or overnight accommodation if applicable. While Christmas is the most common time for these events, the tax exemption is available at any time of the year so if you’d prefer to lighten the January blues you can – providing you haven’t claimed the exemption during that tax year already.”

HMRC are also unlikely to seek tax on seasonal gifts providing the value is reasonable, although they don’t specify what they class as reasonable. Visit: https://www.gov.uk/expenses-benefits-social-functions-parties/overview for more information.