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Does your Work Christmas Party Qualify for Tax Relief?

Celebrating Christmas in the office

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01st December 2022

Dexter Lawrence Written by Dexter Lawrence

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One important thing to take note of is that you cannot claim for an annual Christmas expense if you entertain your associates or your clients. As an example, if you were to host a “directors only” Christmas party, you would not be exempt from paying tax here, as it is not open to every employee.

Understanding rate of claim for your work Christmas party

If you want to claim for your work Christmas party, then you can do so up to £150 per head. You don’t have to limit this to just employees, as you can also include their partners or spouses. As a general rule of thumb, you can add up all the costs of hosting your party such as transport, accommodation and more. When you have this number, divide it by the number of people who are going to be in attendance. Remember that the £150 rule is classed as being an exception, and not an allowance. You have to spend the money if you intend to claim it back as tax.

If you overspend or get a little carried away, then this can change things. Even if you go over by £10, you can’t claim for the £150 - your expense will revert to BIK, or benefit-in-kind and this is subject to NI and tax contributions.

Giving Christmas gifts

Small gifts can be given to your team, and they are exempt from tax. Just make sure that the cost of gifting does not exceed £50 and that it is not cash or a cash voucher. You can’t add the benefit to the contract of the employee, and it cannot be provided in recognition of hard work.

If the cost of gifting an employee goes over £40, then the full amount will be taxed and not just the amount over £50.

Annual party as an umbrella service

If you intend to use an umbrella service, then you cannot claim an annual party expense. If you work for an umbrella service, you are classed as being an employee, so you cannot claim this as a personal tax exemption. Some like to think that they can strengthen their IR35 status by having an annual event, but this is not true. The effect will be minimal.

If you find that the whole idea of completing your tax return gives you a headache, then our local team are here to help. Based in Cornwall, we have vast experience when it comes to claiming Christmas expenses, so you can lower your tax bill without fear of repercussions.

Still unsure? Call us on 01726 216110 and we’ll be happy to discuss things further.

From everyone at DL Accounts, Merry Christmas and Happy New Year!