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Are you sure if your employee parties and social functions are tax-deductible?

If you manage your own company as an employer in the UK, you would have hosted employee parties or attended social events at least once. Many employee parties and staff events, like your end-of-year party or Christmas party, can help build better team bonds. HMRC also recognises the importance of social functions in workplaces. Therefore, if the rules around social functions are followed, staff events are tax-deductible for both the employer and employee.

How do you know if your annual event is eligible?

An eligible event refers to a company-wide, structured social gathering that provides staff with food, drinks and possibly entertainment, such as an end-of-year party and summer barbecue. It should be a get-together event which employers and employees can attend.

Is there an expense limit per person?

Yes, there’s a limit of £150 per attendee (including VAT) as an annual expenditure. If the total cost per person exceeds £150, the expenses are still deductible for the company. However, if the cost of one or more individuals exceeds the £150 per person limit, this would be seen as a taxable benefit for the employee (including the amount for their guests.)

What do you need to record to enjoy tax-free events?

You need to record people who are invited and attended to the event. Additionally, you must keep records of the event’s expenses.

Can any guests be invited except for staff?

Yes, every staff and employer can invite their partner to enjoy the party together.

*NOTE

This cannot be disguised as a entertaining event for clients. Guests must be employees or their partners, not clients or suppliers, or other business associates.

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