The Taxman’s not a complete Scrooge (no, really!), and there are some tax-free benefits to be had this Christmas. So whether it’s providing your team with a well-earned festive blowout, or giving yourself a tax free treat, here’s how to avoid the taxman’s naughty list this Christmas!
Even if your company is a personal or family company, it is still possible to take advantage of the exemption for annual parties and other annual events. Your company can spend up to £150 per head every year on events to entertain your employees. It is usual for these to be the Christmas Party but it covers any annual event. The £150 per head figure includes guests as well as employees and there is no limit on the guests to employees ratio.
It’s got to be available to all staff members and not a select few e.g. just the directors. Be careful if the cost works out at say £160 per head then the whole amount is taxable not just the £10 excess.
Your Company can also claim all the VAT provided it is considered ‘staff welfare’ and not regarded as ‘entertaining’. The VAT can be restricted depending on the number of none employee guests brought by your staff.
If the only attendees are Directors and guests then the VAT element cannot be reclaimed.
You don’t have to pay tax on a benefit for your employee if all the following criteria apply:
- It cost you £50 or less to provide
- It isn’t cash or a cash voucher
- It isn’t a reward for their work or performance
- It isn’t in the terms of their contract
These “trivial benefits” can be paid without any need to tell the taxman, but for Directors of a “close” Company (fewer than 6 shareholders) there is a cap of £300 per year. Benefits could be a meal, tickets, bottles of wine etc. Let your imagination run wild!
So, go on, give yourself a £25 treat each month!