According to the London Society of Chartered Accountants, staff parties and gifts to customers are fully tax deductible, if companies go about things the right way.
So before company executives begin planning bleary-eyed lavish affairs, they should take heed of the rules.
To qualify for tax relief, the party must be open to all staff, and the total costs including taxis and accommodation, must not add up to more than Pounds 75 a head – more than enough for a heavy meal and a red nose.
But the amount applies to total annual staff functions, so party-going companies should watch out. ‘Anything above Pounds 75 can still be claimed as a business expense,’ says LSCA president Howard Gross, ‘but this is classed as a benefit in kind for the employee and they have to pay tax on it at their highest tax rate – a Christmas gift they won’t thank you for.’
On top of this deduction, the VAT on Christmas parties that cost Pounds 10,000 can be recovered, a saving of almost 15%, says mid-tie firm PKF
‘Surprisingly few companies realise they can claim back full VAT for staff on their Christmas parties,’ says Irit Herzenshtein, tax partner at the firm.
She advises companies to have a smaller Christmas party and give ‘staff, your pocket and local community a boost’.
A recent survey by Accountancy Age and Reed Personnel found that four fifths of FDs still intended to have Christmas parties, while a survey by PKF found that more than two-thirds of companies still planned to celebrate the festive season.
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