Christmas – Tax Benefits and Expenses

With Christmas just around the corner, it is worth considering what expenses you can claim through your limited company.

The “Annual Party”

As a director of a limited company, you are exempt from paying tax and national insurance on a party or similar social event, as long as it fits the following criteria:

  • Spend less than £150 per person
  • An annual exemption against a Christmas party, or a summer barbecue
  • It is open to all employees
More than one event

You can have more than one event during the course of the year but the combined cost must not exceed more than £150 per head. So you could have two events, each costing £75 each per person and both would be exempt from tax and NI. However, if the event(s) total more than £150 per person, you will not qualify for the exemption. For example, if you spend £200 per person, you are not allowed to offset £150 against the total spend. Instead you would be taxed fully on the£200 so keep track on what it is costing you.

Invite your partner or spouse

If the prospect of eating alone do not fill you with festive cheer, do not despair. You can also claim the exemption against any spouses/partners that attend as guests. This would mean you could qualify for £300 of tax free partying!

What to include

It is important to ensure that you include the VAT, cost of transport and/or overnight accommodation if these are provided within your £150 exemption per person. You also need to actually spend the money, you cannot withdraw £150 in cash or the exemption will be lost.

Christmas Gifts

You are able to give a business gift worth up to £50 to any one person in any one tax year. However, the gift must be a business gift which could be a business diary for example, as it must carry an advertisement for your company.

Food, alcohol, tobacco or vouchers which can be exchanged for food, drink or tobacco are not permitted as gifts.

If the gift costs more than £50, then HMRC disallow the full amount and not just the element over the £50.

Posted by Beth Hogg