S is for Social Functions
Do you want a tax-free party?
These rules are for any social event throughout the year, but a lot of people associate them with a Christmas party.
To be exempt from tax and national insurance the event must be:
- An annual event!
- Open to ALL employees! (Not just your besties)
- Costs less than £150 (including VAT) per employee (This includes if you pay for transport and accommodation too.)
If you have different departments/locations, you can have different parties, but all employees must be invited to one of them.
If your parties don’t tick all the above, then you’ll have to complete a P11d for each employee and pay national insurance on the cost of the party! (If you have 100 employees and have no other benefits this is going to be a bit tedious!)
If you have a Summer BBQ and Christmas Party, they must both add up to less than £150 per employee to be exempt.
If your Summer BBQ costs £100 per employee and the Christmas party £60 per employee (therefore over £150 altogether) you can’t have both exempt. Here it would be beneficial to exempt the first one as it is a higher cost (you can choose which one). This means for everyone who attends the Christmas Party it will be a benefit and taxable, even if they didn’t go to the Summer BBQ.
What about business tax?
Generally, staff entertaining is tax deductible but remember supplier/customer entertaining is not tax allowable.
So basically, don’t invite customers or suppliers to your Christmas Party too – you mess up the tax benefit AND you’ll have to chill out on the gins!
If you are unsure what is best for your business and personal situation, then please get in touch to discuss.