What Christmas party expenses can you claim?

Fancy celebrating Christmas, but no office party to go to? Find out what Christmas party expenses you can claim if you’re a freelancer or SME. 

The TV ads have started, the music is playing in your local supermarket and if you have children you’ve no doubt already been (not so subtly) reminded that Christmas is indeed on it’s merry way…

But while there’s still a number of weeks to go, as a small business owner of a Limited Company it’s time to take a step back from all of the festive madness and think about you. Jenny Winslow from Intouch Accounting explains exactly what you are able to claim from HMRC when it comes to celebrating this time of year, and how your family can benefit too. 

Trethowans

Afterall, if you can’t let your hair down at Christmas then when can you?!

The technical bit – what is the tax exemption allowance?

HMRC allows a 19% tax exemption via corporation tax on all festive entertaining costs, as long as the rules below are met. And this generosity doesn’t end with you, read on to find out how others can also benefit.

The boring bit – the festive party rules

For your festive fun to qualify for the 19% tax exemption, it must: 

1) Be available to all employees in one central location

More than likely your small Limited Company will be a one-woman band, but should you have more than one employee (other than yourself) any event you host must be available to everyone in one central location.

The event must be available to all directors, staff, or director’s guests (including spouses, civil partners, and children of the directors and employees). So for example if you are married or have a partner with children, they are also able to join in the fun!

2) Cost a maximum of £150 per person

For every person who attends the event there is an allowable limit of £150. This amount is an absolute final limit which HMRC strictly applies.

All VAT, travel and accommodation costs must be factored into this £150 per person limit, so consider this when planning an event. All costs relating to the event are then combined, and divided between the number of event attendees to reach the £150 per person limit.

Should you go over the limit the maximum exemption will not apply, and the total amount will be taxed. HMRC can be a real Grinch when it comes to enforcing the allowance, so if you’re not sure whether your plans may take you over the threshold, be sure to have a chat with an accountant.

3) Be available throughout the year and not limited to just one event (if you so wish)

Whilst the festive period is a great time to celebrate, the allowance isn’t just limited to December. In fact you’re able to party all year round, as long as all events held within the tax year do not exceed the £150 combined limit.

So you could start having a think about planning a summer BBQ, or even a day out for the family. As long as the events are annually recurring and follow all of the set out rules, you’re free to have fun!

Celebrate Christmas with a toast to HMRC!

Regardless of the time of year you decide to celebrate, it’s a fantastic allowance that allows every Limited Company director to take a break from working hard and have some fun courtesy of HMRC. So what are you waiting for, get that party planned now!  

Afterall, what other excuse do you need to celebrate your self employed awesomeness than by throwing a fabulous festive party.

Jenny Winslow works for Intouch Accounting, the expert contractor accountancy firm for Limited Company contractors.