Christmas party
There is an exemption to the normal tax rules regarding entertaining for a ‘Christmas’ (or annual) party.
There is no benefit in kind on employees who attend an annual event/party provided it meets three criteria:
- the average cost per head of the event (or events if you hold more than one a year) must be less than £150 per guest present
- the event must be an annual event – and not a one-off event such as an event to celebrate winning a new contract
- all staff must be invited
If there are two or more annual parties then the £150 limit will be applied across all events – although the employer can decide which events to apply the limit to.
Employees can bring along guests to the event and the total cost will still be both tax and VAT deductible. But beware, don’t try to circumnavigate the rules by inviting lots of clients or suppliers – you’re likely to fall foul of the taxman! The primary purpose of the event HAS to be to entertain staff!
So if you’re a director of your own limited company, you can treat your spouse/civil partner to a slap up meal and claim a tax deduction at the taxman’s expense!
Trivial benefits
New rules were introduced for the 2016/17 tax year which allow up to £300 of ‘trivial’ benefits per employee/director tax free ie the company can pay for a trivial benefit and there are no tax implications if you keep within the rules.
The rules for these benefits are as follows:
- the cost of providing each individual benefit does not exceed £50
- the benefit is not cash or a cash voucher
- the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements)
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)
If any individual benefit provided goes over £50 then it must be reported on a P11d (or posted as drawings!).
The limit is per employee/director (or officer) so both husband and wife can receive up to £300 of ‘trivial’ benefits.
There is no definition of what is a ‘trivial’ benefit but would include the following:
- a meal out to celebrate a birthday
- a turkey at Christmas
- a bottle or two of wine
- coffee and tea provided at work
The benefit can be applied to the director or a member of their household. The definition of a member of their household is as follows:
- spouse (or civil partner)
- children and their spouses (or civil partner)
- parents
- domestic staff, dependants and guests
So if you and your spouse are directors of the company, you and your two children could go out for a meal costing up to £50 per head and £100 would be applied to you and £100 to your spouse – this would leave another £200 allowance each.
Alternatively, if you want to buy a pair of jeans for yourself (or someone in your family) costing £50, use the company card and you can claim it as trivial benefits!
But be aware, you can't just claim the £300 (or multiples of £50!) - the company has to pay for the expenditure - and if the amount paid is over £50 it won't be trivial benefits - it will be drawings!
PLEASE ALSO NOTE THAT WHILST YOU CAN CLAIM VAT ON TRIVIAL BENEFITS, THE VAT INCLUSIVE AMOUNT IS INCLUDED IN THE £300 ALLOWANCE - SO BEWARE!