Those kind folk over at Crunch Accountancy are spreading the festive cheer, with a timely post on what tax exemptions startups & freelancers are entitled to for a Christmas Party! Over to Crunch to explain:
Shameful flirting under the mistletoe, unusual amounts of merriment, and a sore head the next day can only mean one thing at this time of year – the work Christmas party!
You might be thinking a knees-up is all well and good for the big Corporates out there that can afford it - but what about the startups and freelancers out there?
Well, there’s good news. The entitlement to a tax exemption for annual Christmas parties is exactly the same for us little firms as it is for the big corporates!
HMRC have a few rules that stipulate how much and what a Christmas party should entail. Providing you meet the subsequent rules you’ll qualify for a complete tax exemption.
The party has to be an annual event and not just a one-off - a regular Halloween or Christmas party, for example.
It needs to be open to all employees. So no VIP for directors only!
The cost of the party is no more than £150 per head - this encompasses everything associated with the party; travel to and from, food, drink and the late night kebab (if it’s a classy affair).
Make sure that you don’t exceed the £150 limit as this is an exemption and not an allowance. If you’re above the £150 limit by even a pound then you can’t claim an exemption.
You can split the allowance into multiple events providing you don’t exceed a collective cost of £150 per head for the tax year. So you could have a Bonfire Night party costing £50 per head, followed by a Christmas do at £100.
All employees, including yourself as the director, are entitled to bring one family member or partner to the event who will qualify for an additional £150 allowance.
You can’t claim tax relief for anyone that is not an employee or partner/family member of an employee – so any guests or clients that turn up looking for a free mulled wine and mince pie won’t be included in the £150 tax exemption.
So if you’re the director of a limited company with two employees, you would have a tax free allowance for the year of £450, plus a potential £450 if everyone brought an eligible partner.
All that’s left to say is Merry Christmas, and remember that co-workers and clients aren’t just for Christmas, you’ll still need to be able to look them in the eye come January 2nd!
Calum Morrison is a finance and accounting writer for Crunch, an online accountancy firm for freelancers and small businesses.
Thanks Calum and Crunch for this timely Chrimbo info! Startacus members take note! If you need a new Ltd Company formed and you also join Crunch, Crunch will waive the set-up cost of both the company formation and the fee for joining Crunch - saving you £60.00. If you have an existing Ltd company and you are currently in the first 6 months of your financial year, Crunch have waived their set up fee to join Crunch saving you £25.00. Click Here to take up this deal
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