This short article takes you through the main rules but remember: it doesn’t have to be a Christmas party. Salons are very busy in December, so you could have a January party instead to say thanks to your staff.
This is what they say:
To be allowable, the party must be all the following:
Remain below the £150 limit and there is no additional tax or national insurance to pay; and the whole expense is allowable against your corporation tax for the year.
So let’s take a look at each of these requirements:
The £150 limit includes: The cost of the function (including VAT), the cost of transport (e.g. taxi) and overnight accommodation, if either of these are provided.
Divide this total cost by the number of people (including non-employees) who attend to give you the cost per head.
HMRC say that “annual” is something that happens once a year on a recurring basis (such as a Christmas party or summer barbeque). So it follows from this that a one-off event, for example a party to celebrate your salon being open 2 years , cannot be an annual party or function. So in this case, the expense would not be allowed.
Holding a Christmas party can be a great way to show appreciation for your team and if you keep within the HMRC criteria, there’s a lot less tax to pay.
As an alternative to the staff party, there is also something called ‘Trivial Benefits’ if you want to spend £50 or less on each employee. See here: Trivial Benefits | a tax efficient way to thank your staff – and you!
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