Is my Christmas Party Tax Deductible? Planning a Tax Efficient Function

‘Tis the season for the office do! Here’s how to make your end-of-year Christmas party tax deductible!

Christmas Party Tax Deductible
Christmas Party Tax Deductible

(2 minute read)

Throwing the Perfect Party

End-of-year staff parties are a workplace staple: promoting camaraderie, teamwork and reflection in yourself and your employees.

Whether you’re throwing a formal do or something more adventurous, there’s a million and one ways to do it.

But did you know your yearly bash could be tax deductible? You can have your Christmas pudding and eat it too!

When is a Christmas Party Tax Deductible?

You can make a Christmas party tax deductible by following some simple rules.

To take advantage of the tax perks, you must invite all employees to the party. This can’t be a director-only event (unless all staff are directors).

The event must be for entertaining staff and staff cannot be expected to work whilst at the party. This means that if you also invite customers/clients, your staff are not responsible for entertaining them.

(Gifts to customers may be tax deductible, so you might want to consider this option.)

To make your Christmas party tax deductible, you must follow cost guidelines perfectly.

There is a £150 per head limit per year. If you go even a penny over, the whole cost is no longer deductible. (You will become liable for Employers’ National Insurance and your employees will face tax.)

Be aware that the £150 includes entertainment, decoration, transport and accommodation costs.

The funds can be split over multiple events.

For example, a barbeque bash in summer and a Christmas do in winter each costing £75 per head. This is an acceptable way to use your allotted amount.

Let’s say you go over-budget on the Christmas party, spending £100 instead of the planned £75.

The exemption will cover the more expensive event but the least expensive is considered a Benefit in Kind. This means employees face tax on the cost of the summer barbeque.

But you may be thinking that since homeworking is back in, the party is off.

Well, that may not be the case.

Can I Make a Virtual Christmas Party Tax Deductible?

Virtual parties are a great way to have fun whilst staying safe.

The rules are the same as for in-person parties but modified slightly for the online setting.

You can provide hampers of food and drinks and provide entertainment virtually. For example, you could book a virtual wine tasting.

Get creative! Covid restrictions don’t have to dampen the holiday cheer.

Where to get Further Help

This year has been difficult for both employers and employees.

Celebrate by making your Christmas party tax deductible, whether in person or online, to see the year off well.

As always, we’re here to support you with all your tax, bookkeeping and payroll needs. Call us at 01772 788200 to learn more about how we can help you into the new year.

Happy holidays! All the best from the Tax Expert team!

Kind regards Ilyas