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Are Christmas party expenses claimable through your Limited Company?

Posted by: Intouch | 14.12.16

Intouch Accounting

Christmas party expenses

The festive season is well and truly upon us and with less than two weeks until the big day, this weekend is traditionally the most popular weekend for the office Christmas party. So if you’re currently contracting in the midst of the office excitement on site, it’s only natural to feel a little left out…


Even though HMRC is the Grinch throughout most of the year, they do allow even the smallest Limited Company to enjoy the festivities, by permitting a tax exemption for the allowable costs of a Christmas event. So if you’re a one-person band you can still give yourself a festive celebration for working so hard throughout 2016.


What is the tax exemption allowance?

HMRC allows a 20% tax exemption for all festive entertaining costs, so you effectively only pay 80% of the costs.


And should you be a one-person band you don’t have to party alone. Read on to find out how you can invite others to your party…


HMRC’s rules for festive partying

For your event to qualify for the tax exemption, it must be:


1. Annually recurring

The date when the event is held or the type of the event is irrelevant, as long as it’s annually recurring HMRC allow it to be claimable. If you decide to hold a one-off event for either just yourself or others (such as employees, family, etc), you must still account for the expenses, but they will not be treated by HMRC as tax allowable.


2. Available to employees in one location

If your Limited Company has employees in various locations, the event must be held in one central location, which is accessible for all. The event must be available for both directors and staff, or director’s guests (such as spouses or civil partners, and children of the directors and employees).


So in theory, as the director of your own Limited Company you could hold a Christmas party for your immediate family.


3. A maximum of £150 per person

For each person who attends the event an additional £150 per person is allowable. The £150 is an absolute maximum which HMRC strictly applies.


The £150 limit must include VAT, transport costs to and from the event, and the total cost of any overnight accommodation. These costs are then combined and divided between the number of attendees, to arrive at the cost per head.


Should the total amount per head exceed the £150 limit, the maximum exemption will not apply and the total amount will be taxed. HMRC are very strict about this allowance so if you’re unsure, speak to your Personal Accountant to ensure your calculations are correct.


What happens if you have more than one event per year?

Hosting company events isn’t just exclusive to the festive period, you are able to host events throughout the year. You could choose for example, to host a summer event and a Christmas event. So long as the total combined amount does not exceed £150 per head per tax year, the exemption will still apply.


Should any individual event cost exceed this limit, HMRC will only apply the exemption to expenses for the events that fell within the allowable limit.


Final thoughts – have fun!

Regardless of whether you will host a Christmas event, it’s a fantastic allowance that every Limited Company director is entitled to, so ensure you make the most of it. Why not start planning your next event today?


If you have any questions surrounding the annual events expenses, or any other type of Limited Company expenses, be sure to speak to Intouch’s team of expert advisers.


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.