Summer socials and entertaining staff – what you can claim as a business expense

The schools are out, the sunshine has (finally) made an appearance and everyone is looking forward to enjoying their summer, hooray! So you might be thinking about hosting an event for you and your Limited Company employees, but who foots the bill?

In this blog we look at what the rules are surrounding hosting events, and whether you can claim them as a legitimate business expense.

Allowable business expenses

Good news! Staff entertainment is classed as an allowable business expense, so you’re able to enjoy yourself courtesy of HMRC. But whilst they’re kind enough to allow this, there are some rules you must follow in order for it to be allowable.

The Rules

HMRC state that in order for an event to be allowable, as a director of your own Limited Company your event must:

• Be equal to or cost less than £150 per head per year. This value must include VAT, and any travel and accommodation costs
• Occur annually
• Be open and available to all members of staff, regardless of how many you have
• If your employees (or yourself) are part of a salary sacrifice scheme you do not need to declare the amount to those employees
• You’re also able to host a virtual event if you’re still concerned about social distancing, or have members of staff who are located elsewhere. So long as each member of staff is provided with the same thing (ie a hamper of treats, bottle of wine, things they can enjoy during the event) it’s allowable

What if your party is just for one person?

If you don’t have any employees you’re still able to hold an event just for yourself. So long as you follow HMRC’s rules it’ll still be exempt from tax and National Insurance.

What about your employees?

It doesn’t matter how many employees you have, so long as they’re all invited and entitled to the same event, and it follows the above criteria then it’s allowable.

An exemption and not an allowance

The £150 per person isn’t a guideline, it’s a strict limit. If you go over this value, even by a penny, you’ll be subject to paying tax and National Insurance for the full amount, and not just the extra amount. So don’t be tempted by big and expensive events.

Taxevo’s final thoughts

It’s worth also remembering that the £150 limit is for the whole year, and not per event. So whilst you’re planning your summer event have a think about what other events you’d like to celebrate throughout the year, to ensure you’ve got enough of your exemption left over.

How Taxevo can help

We love a good party here at Taxevo, who doesn’t! But no one wants an unexpected bill from HMRC, especially after you thought it was all above board. That’s why it’s always best to run your plans past your Taxevo accountant, to ensure you’re playing by HMRC’s rules.

But it’s not just parties we can help with, our team of expert accountants are on hand to offer guidance and advice on how to run your Limited Company in the most tax efficient way possible. We work hard to ensure you keep more of your money, and only pay the taxman what he’s owed and not a penny more! For more information on the packages we offer take a look today, or get in touch for more information.