If you’re having a Christmas party (or any other annual event) there is an exemption of up to £150/pp you can spend and it’s all tax free!

The conditions

The total cost must not exceed £150 per head, per year. £150 includes VAT together with any extra costs such as transport and accommodation. The £150 is a limit and not an allowance: if the cost is £151, the whole benefit is taxable.

Staff parties

A staff party or an annual function qualfies as a tax-free benefit for your employees providing that you meet the following conditions:

• The total cost must not exceed £150 per head, per year.

• £150 includes VAT together with any extra costs such as transport and accommodation.

• The £150 is a limit and not an allowance: if the cost is £151, the whole benefit is taxable.

• The event must be primarily for entertaining staff.

• The event must be open to all staff (in that location, if you have several branches or departments).

• The event is not just to be for directors, unless all your staff are directors.

• The cost of the whole event is an allowable expense for your business.

• You can claim back input VAT but this may be restricted where you are also entertaining customers.