Date posted: 4th Dec 2023
Clive Owen LLP, leading accountants and business advisers, with offices in Darlington, York, Durham, and Middlesbrough, is informing businesses to be mindful of potential tax implications associated with staff Christmas parties.
As the festive season approaches, the firm is highlighting the importance of understanding the tax rules to avoid unwelcome surprises in the New Year.
Lee Watson, tax partner at Clive Owen LLP, said: “While the season of goodwill is upon us, it’s crucial for businesses to remember that the taxman may not be as generous. Understanding the tax implications of your staff Christmas party can save your employees from an unexpected tax bill.”
Key Points for Businesses:
Employee Tax Relief:
Typically, benefits provided to employees, such as company cars or medical insurance, incur national insurance and tax charges. However, there’s an exemption for employee entertaining, subject to specific criteria. The event must be annual, open to all staff, and the cost per head, including VAT and any travel or accommodation, must not exceed £150. Exceeding this limit requires the full cost to be declared on forms P11D, impacting the employee’s tax. There can also be an impact if there are other annual events attended by employees.
Avoiding Employee Tax Issues:
To prevent tax issues for employees, employers can opt to settle any potential tax bills through a PAYE settlement agreement.
Tax Relief for Employers:
The cost of staff parties is generally an allowable expense, providing tax relief for employers. This is conditional on the event being exclusively for staff, with no clients or customers in attendance. Should external guests be present, businesses may need to consider an appropriate apportionment of costs.
Lee Watson added: “It might sound like a significant amount of money but £150 won’t go that far if a meal, taxis or other transport or even accommodation are included. Planning and understanding these rules can ensure that your business enjoys the festive cheer without the tax headache. It’s about being informed and prepared.”
To find out more about Christmas party taxes, contact us here.
