1st February 2015
With most of companies organising employee gatherings throughout the year, it is imperative that every financial director is fully briefed about the tax break afforded by HM Revenue and Customs. Briefly, the whole cost of any social event and parties, provided that it does not exceed £150 per head per year, is an allowable expense for a business.
Such annual events include Christmas parties, summer barbecues, fun-days and more. Be aware that the cost of the function includes VAT and any accommodation or transportation costs. It is not an allowance, meaning that if the cost of the event is £151, the whole benefit is taxable. The organised event must be open to all staff (in that location, if you have several branches or departments). It is possible to claim back input VAT. However, this may be restricted where you are also entertaining customers.
Overall, if each private sector business (estimated at more than 4.8 million across the UK) spent £150 per employee on their annual events, there could be a potential national spend of approximately £35 billion.Estimated to be worth more than £48 billion to the UK economy by 2020, the events industry are providing options for businesses that keep within the £150 limit, so that they may take full advantage of the tax break.
Sadly, the instigation of this increased tax exemption in 2003, from £75 to £150, is still relatively unknown to many businesses. In our experience, once clients gain a full understanding of the exemption, they feel confident about factoring it into their expenditures. It all really comes down to staying informed and keeping a close eye on budget.
Click here to read through the HMRC tax allowance.