Time for work.
After filling your face with Weetabix and adorning your work clothes, you step outside and close the front door behind you. Hot wisps hang in the air after every breath. You walk over to your car, which lies victim to the frost that slowly covered it during the winter night, and hear ice crunching beneath your boots. The morning is silent, except for the odd chirp of a robin that has chosen to brave the winter season.
‘Tis the season to be jolly, but also ‘tis the season to frantically charge around overcrowded shops the weekend before Christmas Day, snaking between equally distressed people whose arms are flailing about in an attempt to grab whatever remains on the bare shelves. Instead of subjecting yourself to that kind of torture, why not spend the last few days of the working year with your colleagues and arrange a staff Christmas event?
‘But that’s also torture,’ I hear some of you say. Fair enough. However, unbeknownst to some, HMRC will actually relieve some of the tax you incur as part of the cost of the event if you fulfil certain conditions. In English, this means cheaper drinks and a wilder night, as you can recoup some of the costs of the event that you may not be able to remember because you had one tipple too many. Convinced yet? If so, read on. If not, keep reading anyway; the alternative is to return to work with your colleagues that you don’t like, and I’m sure you wouldn’t want to do that.
So let’s begin. There are certain criteria that you must meet in order to make a successful claim. HMRC are a little pedantic when it comes to these criteria, but they are by no means strict.
First of all, you cannot simply hold an event that employees happen to turn up to. This is because, in the eyes of HMRC, business entertainment (on which you cannot receive tax relief) is not the same as employee entertainment (on which you can receive tax relief). Therefore, you must class your event as employee entertainment; when an employer provides entertainment for the benefit of their employees, they do so wholly for business purposes.
For some odd reason, HMRC also have an issue with providing business entertainment events for directors, partners of a business or sole proprietors, and don’t allow you to claim tax back on events that only include these types of people. However, where directors and partners of a business attend staff events together with other employees, HMRC allow you to claim tax back. Weird, but true.
Finally, it is fine to allow non-employees to attend the event as well, but you can only claim back tax on costs incurred by your employees.
And that’s not all! If you were convinced that every shred of generosity had been sapped from our government in recent years, and are shocked at what you’ve read above, then what’s coming will absolutely blow your socks off.
There are particular benefits available if you class your event as an annual party that is available to all employees. If the employer provides one annual event for employees, and the cost of the event per head does not exceed £150, you won’t have to pay any tax. (The cost of the event includes VAT and the cost of transport and overnight accommodation, if these are provided to enable employees to attend. In order to arrive at the cost per head, divide the total cost of the event by the total number of people, including non-employees, who attend).
That’s basically all that you need to know. There’s a lot to take in here and a few fancy words have been thrown about, so I’ll summarise it for you below:
- Basic business entertainment must be classed as employee entertainment, where an employer provides entertainment to an employee for the benefit of the business, in order to receive tax relief.
- Events that include only directors, partners or sole proprietors are not part of the basic scheme.
- Events that include both employees and directors, partners of a business or sole proprietors are part of the basic scheme.
- Non-employees attending events are not part of the basic scheme.
- Events classed as annual parties do not incur tax if the cost of the event per head does not exceed £150. This cost per head includes everyone attending the party.
- If you have any queries, feel free to contact REACT.
Hopefully this clears things up for those who find themselves at some business party somewhere and are unsure whether they can slap another drink onto business expenses. Follow the guidelines above, and HMRC won’t charge tax on your food and drink at your next event. Merry Christmas indeed!
The Week in Review is written by Mitch, our apprentice. Stay tuned to hear more about his adventures here at REACT.