Can I claim for a Christmas party (and the bacon sarnies next day?)

2 December, 2019 · 4 min read

It’s the most wonderful time of the year, except perhaps for HMRC. From your works Christmas bash to the bacon butties the morning after, there’s a load of festive expenses you can write off against tax as a small business. What more excuse do you need to celebrate?

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So, what expenses can I claim?

The HMRC allowance is a surprisingly un-Scrooge like £150 per head. However, there are a few rules. The party must be open to all employees, and most people going must be staff. If a few clients are invited along that’s fine, but HMRC will take a dim view of events that appear to be centered around entertaining clients. The party should also be an annual event and not just a one-off jolly. You’re allowed £150 for plus ones, like partners or family members. Note this only applies to businesses with employees - if you don’t have staff, you’ll have to subsidise your own celebrations. Bah humbug.

Cool! Can I book some fire-eating stilt walkers?

Can you claim entertainment expenses? Sure. Unlike perhaps your employees, HMRC will not judge you on how you spend your allowance. Food, drink, taxis, hotels, giant swan ice sculptures - all are valid expenses. Just don’t go over that £150 limit. Your Christmas party allowance is classed as an exemption rather than an expense, so even if you exceed it by 10p a head you won’t get anything back.

Can I have more than one party?

Yes, but they must be annual events, like a summer party or a Christmas party, and your £150 per head allowance has to cover all events for the whole year - it’s not for each individual event.

Can I claim alcohol as a business expense?

Of course, as long as you’re sharing it with the team. Pre-party drinks are allowable as a staff welfare cost, and any booze served up at the party is fine if it’s within your £150 limit. As a rule of thumb, expenses need to be within reason - so keep the magnums of vintage Champagne for another occasion.

I’ll need to book a babysitter, can I expense it?

Unfortunately not, as child care is not considered to be wholly and exclusively for your business or profession. Many people want to know how to claim babysitting expenses on taxes, but these must be covered by childcare vouchers or tax-free childcare allowance, if you’re eligible for them.

Can you claim clothes as a business expense?

Sorry, those party pants are going to have to come out of your own budget. You can only claim allowable business expenses for uniforms, protective work clothing, or costumes for actors and entertainers.

How do I show the party costs in my accounts?

Parties for employees should be treated as staff welfare in your accounts. Don’t forget, it’s this part that’s not taxable. If you’re inviting along clients too, calculate the cost per head and classify the portion attributable to clients separately as client entertaining.

Can I claim the VAT?

Yes, you can claim all of the VAT on the cost of the event provided it’s for staff and not client entertaining. The £150 a head limit includes VAT. Just don’t go over it, as HMRC can impose penalties if you’ve blown the limit and they think tax is due.

7 other totally expensable festive treats

Client Gifts
These are tax-deductible, as long as they advertise your business, cost less than £50 and are not food, drink, tobacco or an exchangeable voucher. So feel free to gift that calendar of adorable kittens, as long as it’s got your logo on it.
Category: Marketing
Photocopier repairs
We’re sure your staff are too well-behaved to engage in the office party tradition of photocopying body parts. But if it should happen, rest assured photocopier replacement or repair costs are fully tax deductible.
Category: Equipment
Pumpkin spice lattes all round
Just like sarnies, these count as staff welfare and are not taxable. But you must be down to share – buying treats for yourself is not something you could expense.
Category: Staff welfare
Office Christmas tree
You can claim for a Christmas tree, decorations, glitter ball and anything else used to embellish your office. It’s enough to make Scrooge smile.
Category: Miscellaneous expenses
Post-party bacon sarnies
Not only will this make you the Best Boss Ever, it’s also totally tax deductible. Providing refreshments the morning after the party is allowable, as long as they’re not unreasonable or excessive. Hooray!
Category: Staff welfare
Christmas bonus
This is treated as regular earnings and subject to income tax and National Insurance in the normal way. However, a non-cash gift worth less than £50, like a turkey or bottle of wine, can be expensed separately to your party and typically won’t be taxable. Cheers!
Category: Staff welfare
Charity donation
Many businesses like to support a charity at Christmas. If you donate money, equipment, or products your business makes or sells, the value can be deducted from your business profits before you pay tax.
Category: Miscellaneous expenses
This blog is intended as a guide only. Consult your accountant before filing anything with HMRC.

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