Christmas gifts from the taxman for your business

Christmas party season is upon us, and it will extend from early December right the way through to mid-January depending on your company. But no matter when the Christmas party is, it is important to remember that HMRC gives your company a gift each tax year to help cover the costs. You can claim up to £150 per employee for the party, which would include an online or virtual party if your staff are spread across a wide area and you have no other way to ‘meet’. But your party must be open to all your employees for it to qualify for this relief. If you have separate parties across the different sites for your business, then you can still claim up to £150 per person, as long as every employee is able to attend at least one of your Christmas events. The one thing to bear in mind is if you have more than one annual event for your employees, you need to consider how much you have spent across the year as a whole. For example, if you have a summer party as well as a Christmas party, the combined cost of the two for each employee cannot be more than £150.

What if the Christmas party isn’t exempt?

If you have already used up the £150 per employee allowance within the year, or the Christmas party doesn’t qualify for exemption, then your company will need to report the costs to HMRC, and pay National Insurance on them. To do this, every employee’s P11D must include a report of the taxable expenses and benefits relating to the Christmas party. Then Class 1A National Insurance must be paid on the full cost of the event. If the cost of the event is dealt with under a salary sacrifice arrangement, but the cost of the events is less than the salary given up, then you will need to report the salary amount instead.

Let us help you

These rules can sometimes be complicated to apply, especially if you have multiple events you claim for throughout the year. If this is the case, or you simply want to make sure you are complying with the HMRC rules, then please get in touch with us and we will do what we can to help you.