With Christmas nearing, there is an excellent opportunity to spend some of your hard earned money completely tax free by having a Christmas party, or even two…..
Be careful though – make sure you abide by the rules.
The Rules:
You have the opportunity to spend £150 (incl any VAT) per head at your own office Xmas party. The cost is completely tax deductibe for your company, and there is not personal benefit tax on you.
You must invite all Directors and employees along to your party.
The £150 per head can be spent on whatever you like. Food, alcohol, accommodation, paint-balling, theatre tickets – anything.
You can take one partner. So if you are the only Director of your company, your company Christmas party will have a maximum of two people attending.
This isn’t an allowance – you actually have to spend the money, and keep your receipts.
The total cost per head, CANNOT exceed £150. If it does, the whole lot become taxable, which then makes the party pointless (from a tax-saving perspective).
You cannot pick and choose your office party expenses, up to the £150 per head maximum. For example, if you are the sole Director of your company, and decide to have a Christmas party my yourself at the local pub, the maximum you can spend is £150. If it turns into the best Christmas party ever, and you end up spending £210 at the bar, you cannot elect to claim just £150 of the bar tab. The total party cost was £210, which would be entirely taxable, therefore resulting in no tax savings. Avoid this scenario at all costs.
You can have more than one annual party. For example, if you are the sole Director of your company, and decide to have a Christmas party with your friend/partner as your guest, the total allowable amount you can claim is £300. If you have one Xmas party costing £90, another for £100, and a third for £105, you are still below the £300 threshold overall, so its fine.
In fact, you can have an annual party whenever you like – even in the middle of summer (and call it a annual summer party, obviously). The £150 per head limit cannot be exceeded per year – so keep the cumulative party expenditure below this threshold between 01 April to 31 March.
When your record the expense within your No Worries online account, give a description like “Annual Xmas party – food and beverages” – just so we allocate it correctly within your accounts.
Just like any other company expense, your company does actually need the funds to cover the cost of your Christmas. If you have sufficient retained earnings then this will not be a problem. If not, pay yourself a smaller dividend next time you make a divdiend payment. Remember, dividends are paid out of post-tax company profits – however the Christmas party expense is paid out of pre-tax company profits, so will reduce your overall tax laibility.