Can I claim a Christmas party as a business expense?

Posted on Nov 21st, 2017 | Tax

Love them or loathe them, Christmas parties are a fantastic way of rewarding yourself and your employees for a year of hard work.

Because they aren’t total Scrooges, HMRC provides added incentives to limited companies (unfortunately, not sole traders) putting on a Christmas party for employees.

The parties will be exempt from tax and National Insurance, but there are some strict rules, including the following:

  • The party cannot cost more than £150 (including VAT) per person
  • The party must be an annual event, such as a Christmas party or summer party
  • The party must be open to all of your employees (and must consist mostly of employees)
  • Shareholders are not included in the exemption if they aren’t employees or directors

You can also claim an additional £150 per person for a plus one for each employee, providing they are a family member or partner.

Exemption, not allowance

It’s important to remember this is an exemption, not an allowance. So if your party costs £151 (or more) per person, you won’t be able to claim the first £150 as a business expense – the whole thing will be taxed as normal.

The exemption also spans the whole year, so the combined cost (per person) of all parties in a single year cannot exceed £150.

If you want to learn more about business expenses, including what you can and can’t claim, check out our free Business Expenses guide.

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Written by Heidi Corbally

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