Tax advice of the week: Throw a Christmas party
Nov 11, 2011
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If you don’t have any staff, or if there are just a handful of you, it’s still possible to qualify for a “tax-free knees-up” at Christmas, says Tax Tips & Advice. The important thing is to keep within the taxman’s £150 a head exemption, which extends to a guest (such as a spouse or partner). Exceeding it, even by just £1, will “trigger a tax and NI charge on the lot”.
Take a Christmas celebration for a sole director/employee and their partner. “The net cost is £240 (£300 less 20% corporation tax relief = £240).” But spend £301, and the “overall net cost to the company of providing a Christmas outing would be up to £558”. Of course, tipping your budget by a few pounds and ending up with a hefty tax and NI bill isn’t hard to do.
To avoid this trap, make sure that the hotel and/or restaurant is booked in the firm’s name, but a director is authorised to pay the bill personally. That way he can claim back up to £150 a head from the company, while not having to worry about every penny spent. This strategy will work for a small group who are “prepared personally to foot the cost in excess of £150”.