By Karen Staley, Director, Geens Chartered Accountants, Stoke-on-Trent
It is Christmas party time, but do you know the rules when it comes to giving your staff a festive treat?
HMRC allow limited tax relief for company social events, but you have to ensure you don’t overdo it – and we’re not talking about how much you have to drink!
A company social functions qualify as a tax-free benefit if: They don’t cost more than £150 a head/per year, Its primary purpose is for entertaining your staff, It is open to all employees or all employees at a branch/department, The cost per person is the total amount, including VAT for the event, and any transport or accommodation provided.
The money does not have to be spent on a single event, for example, you could have three parties at £50 a head.
In terms of recording the event, the amount spent should be recorded in company accounts as staff welfare.
Of course, an extremely generous employer is allowed to spend more. However, this will be classified as a benefit in kind and staff will have a tax and National Insurance liability to pay.
The employer can settle a tax charge arising on behalf of their employees, using a HMRC PAYE Settlement Agreement (PSA).
Importantly, this tax concession is only for entertaining employees. The full cost of an event will be disallowed if the staff party is incidental to an event where a company is entertaining its customers.
In summary, if you want to get festive with a staff event this Christmas, you can. Have fun and dance the night away.