The Tax Implications Of Your Employee Christmas Party

It’s that time of the year again where the Christmas parties are in full flow. As an employer, you may be wondering how to account for all those party expenses including food, drink, entertainment (e.g. musicians) and any other incidental costs, such as venue hire, transport and overnight accommodation.

Do not fear, the costs of entertaining your staff are an allowable business deduction for tax purposes. If you were to invite your suppliers and/or customers to attend too,  you must clearly define the cost of staff entertaining and supplier/customer entertaining as the latter is not tax allowable.

Another issue to consider, as events are a benefit of employment provided to the staff, do they have to pay tax on the benefit?

Thankfully the answer is no, provided the cost is less than £150 per head, including VAT and all travel and accommodation costs and it is open to all staff and not just directors. If you hold more than one event, the £150 limit applies to the total cost of all events which means if you spend £151 or more, the total amount is taxable.

For help with allowable business deductions,  please email our EQ Taxperts or call your local office contact.