approachable accountants, lydia ebdon, york,chartered tax accountant

Have a great low-tax Christmas

As Christmas party season is upon us, here is a reminder about how to ensure your staff party is tax deductible:
·         The party must be open to all staff, or all staff attached to one geographical office
·         The cost per head must be below £150 all inclusive, i.e. if you pay costs such as for taxis home and thetotal goes over £150.00, none of the costs are tax deductible
·         Partners are allowed to be invited and the cost of £150 per head equates to £300.00 total per couple
·         Only one event per year is tax deductible, even if the cumulative cost is below this threshold
·         Only the actual cost is tax free, i.e. the tax free benefit is limited to the actual cost where the cost is below £150
·         If the limits are breached, the party costs must be treated as a taxable benefit and NIC is payable
·         If you invite clients to the same party, the costs relating to them must be apportioned and are not tax deductible
·         You may also give your staff a Christmas gift without treating it as a benefit so long as its value is “trivial”. It’s up to you to decide the meaning of trivial but HMRC will accept that a bunch of flowers or a bottle of wine is trivial, and their guidance allows for you to give your staff a Christmas turkey tax-free. But HMRC regard larger gifts such as, say, a case of wine a hamper rather than just a turkey, as taxable and if you want to give a larger gift that must go through the payroll and be taxed as earnings.
·         If clients appreciate the work of your staff and say thank you with a Christmas present, remember that you must put the value of the gift through payroll if it exceeds £250, notwithstanding that it is not your cost. Make sure you have systems in place to check for this, if there is a real possibility your staff could benefit from gifts form clients
·         VAT may be reclaimed so far as it relates to staff only, i.e. if a Christmas party comprises 10 staff and 7 guests, you can reclaim ten-seventeenths of the VAT only

If you have questions on tax on Christmas parties or anything else, we’d be happy to help. See our website for details of our free online cloud cafes where you can also try us with any question on tax or accounting. Contact us on hello@approachableaccountants.co.uk or 07880 602226.

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