Staff Xmas Party

11 December 2017

As it is the festive period, we decided it would be a good idea to write a blog around the annual £150 staff HMRC say that an employer may spend up to £150 per head (includes VAT) per year to provide entertainment and parties for staff. That means you can spend £150 and receive a 19% Corporation Tax deduction for your company.

Provided the £150 limit is not exceeded, there can be any number of parties during the year – however it’s generally best to stick to a maximum of one or two as this keeps things easier.

Also note that staff members are allowed to bring a guest, this means that the £150 amount is split £75 for the staff member and £75 for the guest. The guest does not get an extra £150.

To arrive at the £150 figure, simply add together all the costs of the event. This can be things like:

  • Room hire
  • Food
  • Transportation of staff
  • Costs of accommodation

To work out the cost per head, simply divide the total cost of the function by the total number of staff. If there was a particularly large function where it was hard to count up the number of guests, then you will need to make an estimate in relation to how many people the event was booked/budgeted for.

Note that the £150 is not an allowance, so this means that if you spent £155 (just £5 over the allowance) the entire £155 becomes taxable as a P11D benefit.

Qualifying conditions

  1. The party has to be for all the staff, or if you have divisions you may hold a party for that division, separate from the other ones.
  2. There is no Corporation Tax relief for a company if the party is only for the directors (unless you are a one or two person company and both directors). If you have staff, they must be invited also.
  3. Other guests may be invited too, but the primary purpose of the event must be that of entertainment for all the staff.

As always, it is good practice to keep all your receipts in relation to the staff entertainment costs.

VAT

If you are VAT registered, input VAT (VAT on purchases) is fully reclaimable on the cost of the function as "staff welfare" is not regarded by HMRC as entertaining.

This is only applicable to larger companies with more than 2 members of staff – note that HMRC will usually deny any VAT reclaim on the £150 if you’re a one or two person limited company. Note that you will still get Corporation Tax relief.