Beware of the £150 per head exemption before organising your office party.
The idea to get your team members away from work and their daily routines for a social function is sound and meaningful. Rightly so, HMRC recognises the importance of such social event and allows tax exemption to small business owners who look to reward their employees with a staff party or a social event.
Important tax rules on staff parties and annual events
HMRC is stringent when it comes to the extra perks you provide to your staff and the perks are subject to PAYE tax and National Insurance.
But once a year, HMRC allows you to spend £150 per employee which is an exemption, meaning you can claim them as a business expense. To qualify, the event must:
- Occur annually. It can be a Christmas party or a summer event.
- Cost less than £150 per employee. This cost includes VAT and other related expenses such as the event itself and transport.
- Available to all employees.
- Available to their partners, meaning their partners are also subject to the £150 per head limit.
- Applicable to shareholders who are also directors or employees.
What happens if my event costs average more than £150 per person?
If your annual event exceeds the £150 tax exemption per person, you cannot claim the first £150. Instead, you must report the whole amount to HMRC and pay National Insurance on the full cost of the event accordingly. In this instance, it is best to get help from your accountant as you will also need to complete form P11D for each employee.
Can I host more than one annual event?
Yes. Employers can host multiple annual events but must ensure that the combined cost of the events is no more than £150 per employee for the year. However, to make it easier, most business owners choose to use their tax exemption budget during a single occasion.
Let Tax Agility manage your taxes
Tax is probably not the favourite subject among many small business owners. In the UK, tax is a complicated subject and how much tax your business has to pay depends on its structure, the VAT option it chooses, and how much money it makes. We understand that not all small business owners can keep abreast of the latest tax changes, which is why our accountants for small business owners are here to assist.
When it comes to taxes, you can count on us to provide services pertaining to:
- Corporate tax
- Employers’ PAYE
- National Insurance
- Business rates
- Income tax (for directors and shareholders)
Whatever you need, we are committed to making your business a success – contact us today on 020 8108 0090 or get in touch with us via our contact page to arrange a free, no obligation meeting.
If you enjoyed this article, you may also be interested in:
- Accounting tips for small business
- Small business: managing rising costs
- Five ways to improve your company’s cash flow
This post is intended to provide information of general interest about current business issues. It should not replace professional advice tailored to your specific circumstances.