What tax breaks can I get when entertaining staff?

It’s that time of year again where Christmas is fast approaching and as a business owner you’d like to treat your staff to a Christmas party, your way of saying thank you to your staff for their efforts and good work and to maintain morale.
Whilst this is important and necessary, you should also keep in mind the tax implications.

  1. VAT
    Did you know that you can claim input VAT on staff entertaining?  Provided all of the attendees are staff, all of the input VAT can be recovered.  If guests are invited, then the input VAT must be apportioned, so if an event is held which is attended by roughly equal numbers of employees and guests only 50% of the input tax can be recovered.
  2. Benefit in Kind
    And did you know that if the Christmas party is an annual event, and the cost per head is no more than £150, then your employees will not have to pay tax and you will not have to pay NICs on the cost of providing it.  Note that this limit is a total figure, per head, per annum.  If there is more than one annual event, for example you provide a summer event as well, then the combined cost per head for both must not exceed £150. If it does there will be tax implications and you should consider these before going ahead.
  3. Deductible Expense
    Staff entertaining should also be allowable as a deductible expense for tax purposes on the basis that it is wholly and exclusively for the purpose of the trade.

Remember that this is a basic overview of a complex matter and should you require any further information please contact us.

Sonal Thakkar & Carl Barwick

Westbury Accountants and Business Advisors is an accountancy practice based in London. Westbury have been providing Accounting and Tax solutions to small and medium sized businesses since 1936. Talk to the team at Westbury on 0207 253 7272 or visit http://www.westbury.co.uk.