Claiming Christmas Party Expenses Through Your Limited Company
Christmas might still feel half an age away, but many limited company owners will be frantically trying to agree dates and arrangements for their annual Xmas bash.
The company Christmas party is traditionally a time to thank employees for all of their hard work and let loose with food, alcohol and entertainment. And whether you are a one-person limited company or a firm employing 50 people or more, the good news is that you can claim back some party expenses from your annual tax liability.
So how does it work, and what do you need to do to claim party expenses?
You might think that the folks at HMRC wouldn’t be much fun at parties. And looking at some of the rules they use to govern party expenses, we would be tempted to agree.
There is no specific allowance for a ‘Christmas party’, but HMRC does provide tax relief against the cost of holding an ‘annual event’ for your company as long as the party meets certain conditions.
The first and most significant condition is that the annual event needs to cost less than £150 per attendee.
The invite list can include the company director (you), any staff you employ and your partner. But you can only reclaim the VAT element of your party if you there are employees there.
If it is just directors and/or partners attending an event then HMRC says the good or services are not being used for a business purpose.
The £150 per head can include accommodation, transport and food and drink, but it is really important that you don’t exceed this figure. You also need to make sure the event is open to all staff.
If you want to, you can split the £150 per head expense budget over multiple events. This means that you can have a summer bash as well as a Christmas do if you want to, but you need to calculate the cost per head at each event and make sure the total does not exceed £150.
How to claim Christmas party expenses
You can make it easier to claim Christmas party expenses using cloud accounting software like Xero or FreeAgent.
These online accounting packages make it simple to claim expenses under certain specific categories like ‘entertaining staff’.
If you are not sure whether or not you can claim an expense, you should always ask an accountant. are Xero and FreeAgent specialists and our team is always on hand to answer your questions.
To learn more about the software and our services, please speak to a member of the team. Call: 0808 281 0303.