“Is an office party tax deductible?” is a question we keep getting asked
So let’s answer it:
In a nutshell, yes, your office party IS indeed tax deductible.
BUT, as ever there are caveats… if you don’t want your employees to end up with staff booze ups, sorry I meant office parties, being charged as a ‘Benefit in Kind’ to them then you need to follow the rules.
Here’s a very short video explaining, or you can scroll down for more details:
Unlike client entertainment, any staff event is allowable for corporation tax relief, and for VAT to be reclaimed as appropriate.
However, to stop employers using staff trips and events as rewards for a job well done, or as part of their remuneration package, certain criteria have to be adhered to.
- Total spend per head must be no greater than £150 (inclusive of VAT)
- It MUST be an annual event (meaning a Queen’s Jubilee Party next week does not qualify!)
- All employees must be invited to attend
You can have multiple annual events, but the total exemption per capita remains at £150 for combined events.
What’s included in the £150?
The cost of the function includes all of the following:
- Any VAT
- Any transport
- Overnight accommodation if provided
What if I spend more per head than £150?
This £150 per head is an exemption, not an allowance.
Any functions that fall outside of the scope of this exemption are fully chargeable on the total cost per head, NOT just the excess over £150!
If family or household members have attended, and the cost per head is greater than £150, then the employee or Director will be also charged for their guests!
Can I have a Virtual Party?
Yes – you can have a virtual party and the same rules apply.
Pre-covid there was no guidance relating to online events, but by way of necessity this has now been introduced
You can read HMRC’s full guidance on this subject here:
https://www.gov.uk/expenses-benefits-social-functions-parties
And as ever, if you have any questions relating to this, or other accountancy and tax queries, then please don’t hesitate to contact us and we will be very happy to help!
