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Find out how you can still have your office party at the taxman’s Expense!
What are the normal rules?
The event must be primarily for entertaining staff and must be open to all staff. If you have multiple locations it must be open to all staff in that location.
The total cost must not excees £150 per head, per year. If it goes over at all, then the whole amount becomes a taxable benefit.
There can be a number of parties at different times of year with a maximum cost per head of £50 per party and a total of £150 per head for the year.
The £150 limit includes VAT together with any extra costs such as transport and accomodation.
The event must not be only for directors, unless all the staff are directors.
If these conditions are met then the whole event is an allowable expense for the business and you can claim the VAT, though this may be restricted where you are also entertaining customers.
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What about the virtual parties?
HMRC has updated its policies to include the virtual office party, as COVID-19 has prevented some offices being able to get together.
As a virtual office party can’t have everyone in the same location, the party is defined as an annual function provided virtually using IT.
For example:
–An office party is being held virtually and all employees are invited.
–The employees have been sent a hamper containing food and drink to enjoy during the party.
–The total cost per head is £95.
This party would be allowable as everyone is invited, and the costs are not more than £150.
If the cost per head was more than £150 then the whole amount would be a taxable benefit.
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