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Is Your Company’s Christmas Party Tax Deductible?

October 2018

Are you a limited company and do you want to save money on your company’s Christmas do? Well then, you’re in luck, because each year HM Revenue & Customs offer a small tax break for a company’s Christmas party.

Group of work colleagues smiling with drinks at Company Christmas Party

Technically there isn’t an allowance for a Christmas party per se, however, HMRC does provide limited tax relief for the cost of holding an ‘annual event’ for your company, providing certain conditions are met. The relief only applies to ‘annual parties’ available to all staff and is set at £150 per head. This figure is inclusive of VAT. The figure cannot exceed £150, even by a penny, because if it does all the costs (not just those above £150 per head) are taxable as a ‘benefit in kind’

It is important to keep in mind that in the eyes of HMRC, the cost of the party is inclusive of everything, from start to finish. This includes taxis home, overnight accommodation, food and drinks; everything must be factored into the calculations.

Your company may hold more than one ‘annual event’ per year, but the total claim for all events must not exceed the threshold. So, it is up to you which event you choose to make the claim on, it could be your Christmas party, perhaps a summer one, it is completely up to you.

To calculate the cost per head, HMRC states that you should divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.

The £150 per head threshold applies to all those attending including non-employees, this would be relevant if employees are allowed to bring guests for example.

For a detailed explanation of the annual event expense rules, click here (HMRC).

The rules surrounding business expenses can be quite complex, so do not hesitate to contact your Client Manager if you have any questions or need help figuring out what you can/cannot claim.

2 thoughts on “Is Your Company’s Christmas Party Tax Deductible?

  1. hayley somerton says:

    Can we claim back from our last years Christmas Party

    1. Aston Shaw says:

      Hi Hayley,

      Thank you for your comment.

      If there was an error on your CT600, it can be amended within a 12 month period of its filing deadline.

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