A short reminder on Staff parties.
As it's the festive season and employers are taking their employees out to celebrate I thought it would be good to remind about the treatment of these expenses in the company accounts.
1. The full cost of staff parties will be deductible in an employer’s accounts, regardless of the amount involved. Input VAT can also be reclaimed as long as there is no element of customer entertaining included.
2. For employees, the party will only be tax free for them if the party is open to all staff, or at least to all staff in a particular location or division, and the cost is less than £150 per head (inc VAT). If the cost is £151 the whole amount is taxable as a P11D benefit. Not just the excess £1.
3. The cost of the function includes room hire, music, food and drink, transport and accommodation. The cost per head is the total cost divided by the number of people attending, and this will include the staff members as well as any guests.
For example:
If the total cost of a function is £4,000, and only 25 employees attend, then the cost per head is £160 and it will be fully taxable for those employees. If employees can bring partners with them, so that the total number attending is 50, then the cost per head falls to £80, in which case there is no taxable benefit for the employees.
Katherine Fare, FMAAT & AAT Licensed Member in Practice.
Proprietor of Fare Pay & Books (Location Preston, Lancashire).
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