-This article was last updated on 22 September 2021-
Work Christmas parties are a great way to let off steam after a long hard year, and nothing says ‘thank you for your hard work’ quite like an open bar and dodgy DJ. When it comes to Xmas parties we don’t want to sound like Scrooges but there are a few things you should consider before going all out!
We’ve put together an easy guide to help you stay on the right side of HMRC and make sure your Christmas expenses are not going to add to your tax bill!
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Office decoration
In the build up to the festive season decorating the office is a great way to spread a bit of Christmas spirit. The good news is this can be put down as day-to-day running costs which will reduce the tax you pay on profits. However, don’t try and put your family Christmas tree on there, it does not apply to home workers!
Presents
Christmas is a time for giving, but be aware of the tax implications for presents, unless you want to add the taxman to your list. A monetary Christmas bonus counts as normal earnings so will be taxed in the usual way. Any gift that is deemed trivial (not work related) means no extra tax to or National Insurance to pay as long as it does not have a cash value.
So what about gifts for customers and suppliers? It is possible to claim tax relief and the VAT back but there are some preconditions. You cannot exceed £50 per person per year, it cannot be food, drink, tobacco or have a cash value and it must contain an advert for your company. So company branded stationary all round!
XMas party
When it comes to the big Xmas party there also many other considerations. HMRC aren’t complete Grinch’s, they do employ a tax exemption for annual parties. One important stipulation is the party is available for everyone. You should think about downgrading the Moet to bucks fizz because you’ve got a £150 limit per employee. Claim 1p over this and the whole amount becomes taxable! The £150 also includes VAT and any transport/accommodation provided to the employees to enable them to attend the function. To calculate how much your Xmas party is going to cost, you should divide the total cost for the function by all the people who attend.
Get organised early
So how can you keep HMRC happy and give your employees a well-deserved party? Truth be told, it is as simple just getting organised early. Christmas is all about winding down so if there is any time to implement an expense management system, now is the time to do it!
Not only will it ensure that all your receipts and expenses are digitally stored to keep HMRC happy, but it will help you process the information in an easy and efficient way. Making sure that your finance team’s headache comes from a hangover and not a big pile of expenses! You can also employ an automated policy so that expense claims are always compliant with HMRC regulations, helping you to stay in control of your company’s expenditure.
We hope this has helped to demystify HMRC’s Xmas party regulations. If all else fails, just remember to have a good time! From all of us at ExpenseIn, we hope you have a lovely month of Xmas festivities and wonderful New Year!
For more top tips, check out our ExpenseIn blog, including related blogs such as 'Are Christmas Party Expenses Tax Deductable?'.
