Christmas doesn’t need to be a tax headache. Follow the simple steps below and the cost of your annual staff party will not create tax issues, for you or your team.
- All employees must be invited to the event, which must be held at a specific location.
- Your annual Christmas party (or any other annual event offered to staff), will not be a taxable item for your employees, provided that the average cost per head does not exceed £150 p.a. (including VAT). The guests of staff attending are included in the head count when computing the cost per head attending.
- All costs must be included, such as the costs of transport to and from the event, accommodation provided, and VAT. The total cost of the event is divided by the number attending to find the average cost. If the limit is exceeded then individual members of staff will be taxable on their average cost, plus the cost for any guests they were permitted to bring.
- VAT input tax can be recovered on staff entertaining expenditure. If the guests of staff are also invited to the event, the input tax should be apportioned, as the VAT applicable to non-staff is not recoverable.
- If non-staff attendees pay a reasonable contribution to the event, all the VAT can be reclaimed and of course output tax should be accounted for on the amount of the contribution.