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Whilst there is no specific ‘Christmas Party’ allowance HMRC does provide tax relief for an annual event being held for your company. Therefore if you hold off the celebrations until the New Year because of a busy period in your business then this would be fine.
As a company Director you are entitled to provide an annual event for yourself, any staff you employ and your partner but the costs must not exceed more than £150 (including VAT) per person. It’s important to remember this is an exemption, not an allowance. So if your party costs £1 more than £150 per person, you won’t be able to claim the first £150 as a business expense and the entire amount will be taxed as normal. So make sure you shut the free bar promptly!
The event needs to be open for any company employee to attend, you cannot reclaim the VAT element on your party expenses if only directors and/or their partners attend the event. This is because the goods or services are not used for a business purpose in the eyes of HMRC.
If you are a business with more than one location then you can have separate parties for different departments on but you will need to ensure that all of your staff are able to attend an event.
We hope that this assists you with your festive party planning but if you do require further information about your business expenses then please feel free to get in touch with our team.