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The Tax Pitfalls Of The Office Christmas Party

Be careful of the cost per person ...

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Christmas is fast approaching, and if you're a business owner, you may be hosting an event to thank your team. But remember that you have a limit of £150 per person or there will be tax payable on your Christmas party ...

Be careful of the cost per person for your office Christmas party!

Be careful of the cost per person for your office Christmas party!

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In a lot of cases, it is very clear how much it's going to cost per employee, but if it creeps up to £151 then the full amount is taxable. HMRC are very keen to ensure that if this happens, then the tax is paid, even if the business owner volunteers to pay it.

"But how is the cost per person calculated?"

HMRC doesn't have much guidance on this, except they do stress that it is a VAT inclusive cost, even if the VAT can be claimed back by the business. Travelling and accommodation costs are also included in that amount.

HMRC says that the cost per person should be calculated by adding all this together then dividing by the total number of people attending, not the number of actual employees. This can give a bit of relief if partners are invited as that could reduce the average figure somewhat.

There are some interesting examples, where the cost per person could change dramatically:

  • Twenty staff attend at £148 per person. Pay for the taxi home for a couple of attendees who live far away and you've bounced over the £150 per person limit.

  • You book for 50 people, but because of bad weather, only 20 attend. The £120 per person cost has leapt up to around £180 per head and that is now fully taxable.

  • The party goes well for £130 per person, but the directors head off to a nightclub afterwards and buy a vast number of drinks. This is added to the cost of the function which trips the cost per head over the £150 limit.

  • An employee gets too drunk, falls over and smashes a window. The company pays £2,000 to repair it. That amount is added to the cost per person for the function and tax is now payable.

And finally, you must be careful of other events happening around the annual Christmas party. If you take some employees to a sporting event, out bowling or to the cinema, then HMRC will include those payments in the overall 'cost of the annual function' which could significantly increase the cost per person amounts, pushing it over the £150 limit.

"Would you like to know more?"

If you'd like to find out more about the tax payable on your Christmas party then do give me a call on 01908 774323 or click here to ping me an email and let's see how I can help you.

Until next time ...


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More about Helen Beaumont ...

Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.