Tax relief on Christmas Entertaining

With the Christmas season fast approaching, we would like to remind all employers about the possibilities for entertaining the company employees (which includes directors), while getting full tax relief. 

This means that you can deduct the cost from your taxable profits, NOT that the tax man reimburses you in full!

Basically, providing you do not spend more than £150 (including VAT) per person attending (which can include partners), you get tax relief on the full amount. 

Very important is that the event must be available to all employees at that particular company location.

1. If you are a sole director with no employees and based in London you could have an annual Christmas party for you and your partner(spouse) in London – a meal in the West End, theatre show tickets and drinks – so long as the total cost, including vat, was not more than £ 300.00 this would be tax deductible.

2. If you are a two director company based in London you could have an annual Christmas event in Cornwall for you and 1 child each – rail travel tickets, 2 nights 

B & B in St Ives, entrance to the Eden project (or other attraction) lunch and dinner plus drinks plus even the hire of a car – so long as the total cost, including vat, was not more than £ 600.00 this would be tax deductible.

3. If you are self employed employing three staff you could have an annual Christmas event anywhere in the country, or overseas, with a partner/(spouse) – hiring a four bedroom self catering property, travel costs to and from the accommodation plus food and drinks for the period of letting – so long as the total costs, including Vat, was not more that £ 1,200.00 this would be tax deductible.

4. If you are a sole trader employing no staff you can have a mince pie with your tea !

The four basic rules in a nut shell

  • It must be, or planning to be, an annual event.
  • You must not have incurred other annual staff entertainment costs during the year
  • You do not spend, including Vat, no more than £ 150.00 per person ATTENDING

Check with us for specific advice first before committing yourself to an event.