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July and August are traditionally when many firms hold summer parties for their employees to reward hard work in the first half of the year. HMRC allows a bit of tax relief for summer parties – same as for Christmas parties – allowing you to throw a few more sausages on the BBQ safe in the knowledge you’re as tax efficient as possible.
The key figure here is £150; that’s the annual amount per head you’re allowed for social functions and parties. Bear in mind, however, this is an exemption, not an allowance. Even if you spend £151 per person, you can’t claim back the first £150, and the whole thing will be taxed as normal. If you want to claim exemption, £150 is your maximum annual amount.
To claim the exemption your party must be open to all employees. For the majority of Crunch clients (one and two-person businesses) this won’t be a problem. However, if you’re a growing business you need to ensure everyone is invited.
You can also claim tax exemption for any family members who attend.
Record the cost of the party as a Staff Welfare Expense in Crunch and you’re good to go. Don’t forget to scan and upload any receipts or invoices for secure storage.
HMRC stipulate that the party must be an “annual event”, not a one-off.
It’s also important to note this is an annual maximum. If you claim £150 per head for a summer party, you cannot claim anything for a Christmas party. However, you can split your £150 exemption over a number of events; for example £75 for a summer BBQ and £75 for a Christmas party.
You can also check out our article, “Should employers fear the office Christmas party“, for more information.