How to have a tax-free Christmas
by Startacus Admin
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!
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Published on: 4th December 2013
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