We are finally getting closer to that magical time of year where celebrations flow and the Christmas and New Years parties begin. Time to let loose, have fun and for employers, to treat your employee’s to a good Christmas party for all the hard work they have put in throughout the year. But, do you know the tax implications?

You may already know about the expenses and benefits on Christmas parties but if you don’t, here are the current rules regarding staff do’s:

To be tax exempt …

  • It must be annual event such as Christmas/New Years parties
  • It must be open to all of your employee’s
  • It can’t be no more than £150 per employee including VAT

Exemptions on tax also applies to businesses who have more than one location or throws several parties for different locations/departments. As long as it’s available to all employees, this is still tax free.

So that’s great news for employers wanting to provide their staff with a good Christmas shindig! But what if you want to include customers in the festivities?

Unfortunately the HMRC won’t allow tax deductions on customer entertainment. This can be disappointing when you want to give your loyal customers a treat at Christmas or even treat them to lunch or a casual drink throughout the year. This expenditure is not allowable as a deduction against profits. But, regardless of it being tax exempt or not, why not treat them anyway! This will boost morale between businesses, ensure that you are appreciative of their custom and hopefully secure a positive business relationship for a lengthy amount of time.

Plus it’s not all doom and gloom. As well as staff entertainment being tax exempt for annual functions that are below £150 per head, since 6th April 2015 employee benefits in kind are tax exempt if they cost you less than £50. So, any employee entertainment that you plan outside of the usual annual parties can be tax exempt if under £50 and won’t count towards your annual parties, leaving you more cash to splurge, tax free, on a good old Christmas knee’s up!

So if you are currently planning your annual Christmas party or any other employee or customer entertainment and need help, just give us a call!


Information taken from ‘Tips & Advice Tax – 15th Year, Issue 14′ and https://www.gov.uk/browse/business/expenses-employee-benefits