Can I claim Christmas party expenses through my Limited Company?
The Christmas season is officially here and contractors working in corporate environments can’t fail to notice that their salaried colleagues are gearing up for the company Christmas party. There’s no need for contractors to feel left out though. HMRC allows even the smallest Limited Company to enter into the spirit of things and enjoy a tax exemption for the allowable costs of their Christmas event. So if you are the only employee you can still benefit and enjoy a well-earned Christmas shindig for your most valuable member of staff: you.
Taking advantage of the tax exemption available for your annual events means you effectively only pay 80% of the costs. And if you are your only employee, read on to learn why you don’t have to party alone…
It’s rare for HMRC to encourage you to have fun, so why not have a Christmas party of your own this year and make the most of it!
HMRC rules for Christmas party expenses
To qualify for a tax exemption the event must be:
The timing of the event doesn’t matter. It doesn’t have to be a Christmas party; it could be a summer party instead. What matters is that it is an annually reoccurring event. If you hold a one-off staff event you should still account for the expenses, but they won’t be treated as tax allowable.
Available to employees generally at one location
If your company has several locations the event must be available to employees generally at one location. The event must be available to both directors and staff or director’s guests (not just directors alone). Director’s guests can include a spouse or civil partner. It can also include director’s and employee’s children. This means you could hold a Christmas event for you and your immediate family if you wanted to. You could also hold an event for any staff you have (even a part-time employee), their partners and children.
A maximum of £150 per head
For each partner or guest who attends the event an additional maximum £150 per head is allowable. This is an absolute maximum amount which HMRC strictly applies.
The calculation of event costs includes VAT. It also includes transport costs and the total cost of any overnight accommodation. These combined costs are then divided by the total number of directors, staff and guests attending to arrive at the cost per head.
If the expenses of an event rise above the £150 per head maximum the exemption does not apply and the entire cost will be taxed. HMRC are very strict about this so to avoid any nasty surprises, speak with your contractor accountant to be sure that your calculations are correct.
If you have more than one annual event
Many Limited Companies hold more than one annual event. As a Limited Company contractor you’re free to do the same. You could choose to hold both a summer event and a Christmas event, for example. As long as the total combined costs of each individual event you hold do not exceed the maximum £150 per head the tax exemption will still apply. If any individual event costs exceed this, HMRC will only apply the exemption to expenses for the events which fall within the allowable limit.
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.