Your party must be:
- Open to all employees
- An annual event
- Cost less than £150 per head
If you meet the above criteria then there is no benefit in kind on the Christmas Party and it is allowable for tax.
- The £150 includes VAT
- If the cost is £151 then all of it is taxed as a benefit in kind!
- This is not a licence to put a flat rate of £150 through your accounts
- You can have more than one event but the £150 is reduced proportionately
- Like all business costs you must have a receipt
- The event must be for all employees and not just directors – except where the director is the only employee
The £150 limit is for each employee so no family or friends allowed. However if you are a Director and therefore an employee of your own company then you can have a Christmas meal courtesy of the company.
Check out HMRC’s website for more detailed information on social functions and Christmas parties at http://www.hmrc.gov.uk/paye/exb/a-z/s/social-functions.htm