business expenses

Christmas Party got you spending? Here’s what you can and cannot claim as a business expense.

If, as an employer, you want to throw a Christmas party for your staff, there are certain National Insurance and reporting obligations which you will need to be aware of. What you need to report and subsequently pay is dependent on a number of factors including who is able to attend and how much it costs.

Any party or function which is open to all employees, is annual, as is the case with a Christmas party, and costs up to £150 per person, is exempt from reporting for tax and national insurance. For those businesses spread over multiple locations or split into departments, the exemptions still apply, and you can arrange separate parties for separate locations or departments provided that all employees are able to attend one of them. It is important to remember that the £150 is an exemption rather than an allowance, so if your party costs £151 per person, the whole thing is taxed as normal; you cannot claim the first £150 as an expense and just pay tax on the rest.

These rules also apply to online events and virtual parties, reflecting our new way of working, however, there are further things to consider in these cases. In order to prove to HMRC that your online party qualifies for the exemption, you will need to find a way to prove how many people attended and that it was available to everyone. If there is some sort of structured entertainment during the online event then that will help to ensure it qualifies, this could be a quiz, a musician or other performance. 

Next, there is the issue of providing food and drinks for the party when it is online, and employees are joining from home. One suggestion is to purchase a hamper for staff which is sent to them to consume during the party. Be aware that just sending a hamper will not qualify for the exemption, you need the event as well. If you would prefer not to organise the event, you could opt to send a gift out to staff instead, which could be done under the trivial benefit rules which allow a gift of up to £50 including VAT to be given to employees without tax being charged.

If you are unsure about what to claim or not, or how you might go about claiming exemptions and expenses, you may wish to get in touch with Neon Accounting. We offer a range of services and advice and will be very happy to help.

Call us now on 01926 311736 or book a free consultation