✨ Festive Savings: Christmas Expenses Your Business Can Claim

Planning a Christmas party for staff this year? Here is everything you need to know about what you can claim back before you get booking...

Fancy pushing the boat out this year and throwing a sparkly office party? Before you get started, read this simple guide on what’s an allowable expense to claim tax relief through your company. Understanding what costs can be used to reduce your taxable profits & reduce what you need to pay to the tax man (scrouge) will help you set the budget. 

At Square we love a party! Entertainment for staff plays a big part in keeping your team motivated and saying thanks for all the hard work they do. And the good news is, HMRC are not all bah-humbug.🎁

What exactly is defined as staff entertainment by HMRC?

Before you book Michael Buble to sing at your Christmas party, you need to be clear on what exactly is defined as staff entertainment. Sorry to pop any baubles - though Michael may not get an invite. Staff entertainment covers food, drink and other forms of hospitality for employees – client entertainment does not attract tax relief

The party must also meet the following requirements;

●        It has to be an annual party such as Christmas or a Summer BBQ.

●        The party has to be open to all employees.

●        And the important bit - the cost per head can not exceed £150 per annum (split across all parties/events)

Note: Guests such as spouses/partners can attend, but they count towards the cost-per-head calculation.

How is the cost per head calculated?

Ok, let’s move on to the slightly more complicated bit of how that £150 threshold is calculated.

The maths is simple. HMRC require you to take the total cost of the event (including food, drink, venue hire, entertainment, accommodation, taxis – the lot!) and divide that by the total number of attendees, including any guests.

The £150 is not an allowance. If you go even £150.01 over, the whole amount becomes a taxable benefit for employees. Not the best Christmas gift – so best to keep an eye on the budget!

Christmas plus ones?

HMRC require you to include guests in the cost-per-head calculation but the exemption still applies as long as the event is primarily for employees. You can invite guests — it doesn’t break the exemption — but they don’t have their own separate £150 allowance.

So, can you have two events?

Yes – but only if the combined total stays within £150 per head for the whole tax year.

If you already had a summer BBQ or other event, you may have already used up some (or all) of your allowance. You can have multiple events if you plan the costs carefully. Two smaller celebrations may work better than one large blow-out.

Throwing a simple meal or even using the office as the party venue could save costs and help you stay within budget.

What are your reporting obligations?

If the cost per head goes over £150, the whole event becomes a taxable benefit.

You’ll need to report this to HMRC — either via P11Ds or through the payroll.

If you'd rather avoid the admin, let us handle the whole shebang so you can get on with having a jolly good time!

Book a free chat with a Square today — we won't even ask for a Christmas pressie.

Speaking of pressies…

What if you want to gift your employees something?

If the value is under £50, you’re all good — it can be classed as a tax-free trivial benefit. Chocolate, bubbly, pamper sets… all fine!

Just remember the key rules:✔ Not cash or cash equivalents✔ Not part of a salary sacrifice arrangement✔ Not a reward for work performed

If you’re unsure, just get in touch.

And as a little gift from us….

We’re offering £25 off your first self-assessment tax return with us. Get in touch and the Square elves will help make your festive period as smooth as possible.

If you have any questions about entertainment expenses, we’re always a call away. No question is too small — that’s what we’re here for.