Allowable business expenses: The Christmas party season is upon us!

With the festive season in full swing and Christmas parties being the talk of the office, 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 function, as long as it fits the following criteria:

  • Spend less than £150 per head,
  • An annual exemption against a Christmas party or summer barbecue,
  • It’s open to all employees
Two or more functions

You can have more than one event during the year if the combined cost does not exceed £150 per head.  This means you could have two events, each costing £75 per person and you wouldn’t have to pay tax or National Insurance on them.  However, if the two events totalled above the £150 exemption, you wouldn’t qualify.  So watch the number of sausages you buy at the summer BBQ!

Remember, the £150 is an exemption not an allowance against more expensive events!  For example, if your events total £200 per employee, you wouldn’t be able to offset the £150 against the cost and therefore would not be eligible for exemption. Furthermore, the exemption can only be claimed once per tax year also.

Partners/Spouses

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

It is important to note that the cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided.

Posted by Chris Mollan