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Are Christmas Parties Tax Deductible?

The festive season is upon us, the Christmas trees are up, and festive songs are playing wherever we go. The highly anticipated Christmas office party will soon be here too. So, before the festive spirits start flowing and the dodgy Christmas jumpers are put on – let’s talk about are Christmas parties are tax deductible.

The simple answer is Yes. As a limited company you can claim back on a festive party. It will come under the corporation tax part. As long as you are entertaining employees, it’s tax deductible. However, there are some things that you will need to think about.

For example, the total cost of the Christmas party must not exceed £150 per employee. The £150 needs to be inclusive of VAT, transport and accommodation if you are covering that too. The Christmas party must also be for your employees. If your employees are not the main reason for the party, then it will not be tax deductible.

All employees must be invited to the Christmas party. It can not be a festive celebration for directors only. However, if your staff are only directors then this will be tax deductible.

The most important thing to note is that if the Christmas party exceeds £150, even by just a penny, then you will not be eligible for the tax deductions. This is because you have exceeded the threshold allowed.

Some companies choose to throw a party for every possible occasion throughout the year. This is fine, however, the total costs for all these events must stay within the £150 per head in order to claim back. For example, you could have a Summer BBQ at £50 per head and then a Christmas party at £100 per head. It is a total of £150 per head, per year, not per party.

As with all claims for expenses, you need to hold an event in order to claim it back. It is not possible to make a cash claim for £150 per head, for example. HMRC advises that you divide the cost of the event by the number of attendees. This will then calculate your cost per head.

If you are a one-person business and don’t fancy a Christmas meal out on your own, it is not possible to claim the £150 per head in cash or vouchers.

Planning an office Christmas party and want to make sure it will tax deductible? Call our team of accountants now.

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