Guest Article from Tim Warr – Warr & Co Chartered Accountants
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:
the total cost of the function must not exceed £150 per person attending;
the function must be open to all employees (or all employees at a particular location); and
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. 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 the employees.
The function does not have to take place at or near Christmas. So if they so desired, they could organise a function for themselves and their spouse (as a guest) at another time entirely. Nor does there only have to be one function a year. So the employer could celebrate Christmas with his spouse and perhaps have a separate function for their birthday or to celebrate a business related event. Provided of course that the total cost per person over the tax year does not exceed £150.