Claiming Christmas expenses through your Limited Company

Claiming Christmas expenses through your Limited Company

Can I claim Christmas party expenses through my Limited Company?

The interest-free sofa adverts have started and the supermarkets are full of advent calendars, yes you’ve guessed it, it’s now officially Christmas. If you’re currently contracting within a corporate environment the annual Christmas party is probably a hot topic amongst permanent employees.


But there’s no need to feel left out, as HMRC give even the smallest of Limited Companies the ability to take advantage of a tax exemption for any allowable costs of their Christmas event. So you can still have a good old merry knees-up for your Limited Company’s most valued member of the team.


In this blog we take a look at the rules surrounding Christmas party expenses and what you can claim for. We also look at why it doesn’t have to be lonely this Christmas, as the rules for claiming can extend to others if you’re a single-person Limited Company contractor.


How much can I claim for?

If you take advantage of the tax exemption for annual events it means that you’ll only have to pay for 80% of the costs. HMRC usually spend most of the year telling you how to stay compliant and reinforcing the the taxes you must pay, so why not make the most of their generosity at this time of year?


Which HMRC rules apply to Christmas party expenses?

For your event to qualify for a tax exemption, the event must meet the following criteria:

The event must run annually – If you’re going to party once then you’ll have to do it every year (sorry about that….!) The event doesn’t have to be restricted to Christmas though, it could be a summer party or Easter event. The point here is that whichever event you choose to celebrate it has to be annually recurring. Do bear in mind though that if you decide to have an event for just one member of staff, you must still account for the expenses and that they will not be treated as tax allowable.

The event should be available to all employees in one location – That includes all directors, staff and guests. The guests of directors can include spouses or civil partners. Children of the directors or employees are also included within this. This inclusion therefore means that if you wanted to hold a Christmas party for you and your family, there’s nothing saying that you can’t. Part time employees are also included in this, so you could have a party for them, their partners and children.

There’s a limit of £150 per head – If you were planning on treating yourself or your employees to a Christmas party in the North Pole, it’s worth bearing in mind that there’s a limit of £150 per head. This is the absolute maximum and HMRC will make no exceptions. This is not an allowance and therefore it is the receipted amount that is an allowable expense.

The £150 includes VAT, transport costs and the total cost for any accommodation. The total amount is then added together and divided up between the number of guests attending the event.

If you’re feeling generous and thinking about footing the bill for any costs over the £150 per head, don’t! Even a penny over will mean that the exemption will be void and the total cost will be taxed. It’s not worth the extra large bill just before Christmas, so if you’re in doubt speak to your contractor accountant to be sure everything has been calculated correctly.


If you like to party throughout the year

Annual events don’t have to be limited to just one per year. You could hold one whenever you wish, as long as the total combined costs of all events do not exceed the £150 per head threshold for the tax exemption to still apply. If you do happen to go over the threshold for any particular event, HMRC will only apply the tax exemption to expenses for the events that have fallen within the allowable limit.


Giving gifts to employees

It’s also worth bearing in mind that you are entitled to claiming back any costs for ‘trivial’ gifts you purchase for your employees. Now this doesn’t mean that you can buy them all a brand new Ferrari and claim the cost back! These gifts must be in keeping with the season, so giving your employees a bottle of wine or turkey is acceptable, but giving them a case of wine or a Christmas hamper would be considered as a non – trivial gift and therefore not allowable.


It is always best to discuss any annual event expenses with your contractor accountant, to ensure that you are covered by the tax exemption before you part ways with your pennies. If  you’re thinking about switching accountant, or even becoming Limited in the New Year, call our team on 01202 375 562, or email us at


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.


What to consider when becoming a contractor

What to consider when becoming a contractor

It’s safe to say that almost everyone knows someone who has decided to take the leap into contracting. Be it for lifestyle or financial reasons, or maybe even the outcome from starting a family, more and more people are seeing the benefits from entering the world of contracting.


But how do you become a contractor, what’s involved and what do you need to consider? In this blog we set out to answer the top five questions asked by contractor newbies, in order to help get you started on this exciting new venture!


Step 1 – Check the current market for a demand in your skills

Before quitting your job, make sure there’s a demand for the type of work you do and the skill sets that you possess. Take a look at some job boards such as Contractor UK and CWJobs to get a feel for what’s currently in demand. Sites like IT Jobs Watch and testing circle will give you an indication into the types of day rates you can commision, which will put you in good stead when gauging how much you can expect to earn.


Step 2 – Decide on what your trading structure should be

Will you trade through your own Limited Company, or work under an Umbrella company? Do the contracts you’re applying for state whether you need to be Limited, or do you want to have your own professional presence as a Limited Company? We appreciate that deciding on your trading structure can be daunting, as there are many things to consider. Download our guide: Limited Company or Umbrella – which is the right choice for you? to fully understand the pros and cons for each and how your chosen structure will affect your overall take home pay.


Still unsure of which direction to take? Our advisers can tell you whether your contracting circumstances would make you suitable to trade through your own Limited Company. Speak to them today, call 01202 375 562.


Step 3 – Understand IR35 and how you can claim expenses

Have you heard of IR35 but unsure of what it is? In short, IR35 determines whether you are an independent contractor of your own accord, or are acting as a disguised employee. Being regarded as ‘inside’ or ‘outside’ of IR35 will have a significant impact on your ability to claim tax on both your earnings and things like expenses, so it’s important to understand the impact of IR35.


If you decide to go Limited, your contractor accountant should be able to guide you on IR35. Here at Intouch Accounting we include IR35 contract risk assessments as part of our monthly service fee. To see what else is included take a look at the full list of service inclusions.


Are you considering travelling for contracts or purchasing specific equipment, but worried about your ability to claim it back? The resources section of our website has an extensive range of guides, specific to the different types of expenses you can claim for. We have also created an ebrief that explores the changes to how contractors can claim for business expenses that will come into affect in April 2016. Download it now so that you are up to speed with what you can claim for when contracting.


Step 4 – be prepared

When scouting for new contracts make sure your ‘shop-front’ is dressed and ready to receive new customers. In other words, make sure your CV, LinkedIn profile and personal website (if you have one) are all up to date and showcasing your latest work and skills. Shout about your achievements and ask previous clients for testimonials to display on your LinkedIn profile. All this will help to get you noticed and ultimately that dream contract.


Take a look at our blog, do you look like you mean business? for advice on how to get your business website in tip top condition.


Step 5 – leave full time employment and take the leap!

On paper this step is so simple, but in reality this can be the toughest part! Letting go of the security a full time position provides and starting a new way of working that you’ve never experienced before can be scary, but anyone who has made a success from contracting will tell you that it’s the best professional move they’ve ever made!


With the New Year just around the corner, why not make 2016 the year to be your own boss? If you feel confident of your decision and are ready to take the leap, remember that you contractor accountant is with you every step of the way. Sign up with Intouch today and you’ll get unlimited advice from your dedicated Personal Accountant. Plus, we’ll set up your company for free.


If you have questions about the stages of setting up, or just need to talk through your options with someone then give our advisers a call on 01202 375 562.


Want a more comprehensive guide on starting out in contracting? Download our guide: How do I start out as a contractor?


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.