People enjoying a festive party - business expense

Can you claim your festive party as a business expense?

By Published On: 6 November 2023Tags:

It’s that time of year again when things start to get festive and many Limited Company directors start planning their annual ‘do’. HMRC are somewhat generous when it comes to events, as staff entertainment is considered an allowable business expense, provided you follow all the rules.

In this blog, we’ll cover what you need to do to ensure you stay within HMRC’s regulations.

The Rules

Your event will be considered an eligible business expense for Tax and National Insurance exemption if you meet the following criteria:

  • The cost of the event totals to less than £150 per person, per year (including any additional costs such as travel and accommodation)
  • The event is open to all employees
  • The event is annual
  • If you have employees on a salary sacrifice scheme, you need to report how much the party is worth to them

If you plan on hosting a virtual event rather than an in-person one, this will function the same way.

Are there limits to the number of employees?

Whether you have many employees or you’re on your own, your event will be free from Tax and National Insurance, so long as you follow the rules. The event can also be extended to other members of staff, or family members, children, etc, so long as the limit is maintained.

Remember, this is an exemption, not an allowance!

Unlike an allowance, if you exceed the £150 per person limit, even by a penny, the whole business expense will no longer be exempt from Tax and National Insurance. To ensure this doesn’t happen, calculate the cost of your event beforehand. Here’s how to do that:

  1. Total up all the associated costs
  2. Divide this figure by the total number of employees in your company

If you have multiple events like this throughout the year, such as a festive and a summer party, keep in mind that the £150 limit applies to the whole year, and is not per event. For more detailed information regarding staff events, take a look at the website.

How Aardvark Accounting can help

While you’re having a great time partying, we’ll keep the taxman off your back by ensuring you stay compliant with the staff business expense entertaining rules. We’re experts in Limited Company accounting so we can guide you through the complex world of regulations and legislation, whilst maximising your take-home pay. To find out how we could support your Limited Company journey, get in touch today.

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