HMRC allow an exemption from tax, National Insurance Contributions and reporting if your Christmas party:
- Is an annual event, such as a Christmas party or summer barbeque
- Is open to all of your employees
- Costs no more than £150 per head
It’s important to note that the £150 figure is an exemption, not an allowance – it cannot be applied to events over and above this cost. If your Christmas party costs £500 per head you cannot offset the first £150.
You can only use the exemption once per tax year up to its maximum value – if you already held a Halloween party that cost £100 per head and your Christmas party will cost £75 per head you will not be able to waive any tax or NIC’s for your Christmas party as the combined total is over the £150 figure (more info here).
Conversely if you are holding two parties costing £70 per head each, you can claim the full amount as the combined total is below £150.
You can also claim a £150 exemption for any family members who attend – so if it’s just yourself and your partner you can go crazy to the tune of £300 tax-free.
There’s more information available from HMRC here and here.
Source: Freelance Advisor
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Replies
very useful to know!
We normally have a party at ours for the staff could it be put against that?
I was told by my accountant that Food is covered but not drink. Also that you obviously can't invite your suppliers or sub-contractors and claim that against tax. We had our first work Christmas meal and it was definitely a "feel good" event. It is a moral booster that for sure!
My understanding is if you use the exemption to cover, for example, a Staff Christmas party (with/without partners) the total cost of the event (including food, catering, entertainment at the event, transport to/from event, decorations, hire of venue, accommodation & alcohol) are all allowable within the exemption figure.
However in the normal course of 'entertaining' (staff and/or clients) throughout the year, then you can NOT claim for tax relief (or vat ?) on alcohol.