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A Festive Tax Break

As Christmas approaches thoughts turns to office parties. So what view does the tax man take when an employer arranges a Christmas party for their staff?

Well, subject to meeting certain conditions the employer will be entitled to claim the cost of the function as a tax deductible expense without any liability crystallising on his employees.

The conditions are:

  1. The total cost of the function must not exceed £150 per person attending
  2. The function must be open to all employees (or all employees at a particular location)
  3. A function of some kind must actually take place

The employer does not have to restrict the function to employees only and so at the discretion of the employer, employees may bring guests. Where guests do attend, they are included in making sure that the cost of the function does not exceed £150 per person attending.

An employer may be a multi-national PLC or a one person limited company such as a computer contractor. If the employer is self employed then the allowance is not available for the proprietor or partners, but is available for their employees.

A function must actually take place, so if instead of organising a Christmas party an employer provided his employees with Christmas hampers, a benefit in kind would crystallise on his employees.

The function does not have to take place at or near Christmas. So if he so desired, an IT contractor could organise a function for himself and his spouse (as a guest) at his contract renewal. Nor does there only have to be one function a year. So the contractor referred to above could celebrate Christmas with his spouse and contract renewal with a fellow computer contractor. Provided of course that the total cost per person over the tax year does not exceed £150.

Disclaimer

This document has been produced for general guidance only and does not constitute tax advice. Whilst every care has been taken in its preparation, Warr & Co will not accept liability for any loss incurred as a result of any use made of this document or its contents. We will be happy to offer specific advice to clients when requested. Should you have any queries or wish to discuss any of the points raised please contact Suresh Dhokia or Peter Edwards on 0161 477 6789.

Date of Article: 28th November 2011


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