Planning for your Staff Christmas Party

1 week ago by Oliver Atkinson

As we hit the Autumn and start getting our scarves and hot chocolates primed for those chilly morning commutes, many businesses will now be starting to think about what to do for their annual staff Christmas party before everywhere gets booked up.

Before you start ringing around different restaurants and venues however, it’s a good idea to have a handle on how HMRC views these events and how much you’re allowed to spend before making any commitments.

There are set guidelines from HMRC on this, and whilst they don’t specifically mention Christmas parties, for many businesses in the UK this will be their main annual staff event.

What do HMRC say?

According to the guidelines, the cost limit per person for annual staff events is £150 or less per head. This has to include all costs, including transport, food, drinks, and any other activities in order to be an allowable expense.

The business must make the event (or events if the business has several locations) open to all staff and must actually put on an event to claim the costs – you can’t simply claim the cost without receipts.

The £150 per person limit is an annual allowance, so if you hold another staff event during the year then any costs for this will contribute towards the £150 limit. Deduct any expenses per head for other events held before working how much you left for a Christmas party.

Who can come?

Whilst all the staff must be able to attend if they choose to, directors of Limited Companies are also able to take their partners under the same allowance rules. However, it’s worth noting here that If the event is only for company directors and not the staff, then the rules here do not apply, and instead the normal entertainment rules should be used. You are also able to invite and pay for other guests using the same £150 allowance, but only as long as the focus of the event is that it is a staff event, and they make up the bulk of the attendees.

How do I treat this?

If you’re doing your own bookkeeping, then a staff party may not seem to really fit into any of your standard P&L account codes. We would recommend setting up and using a ‘Staff Welfare’ expense account for any associated party costs so you can keep it all in one place.

If you are a VAT-registered business, then you can also claim back the VAT on your party (unlike normal entertainment costs), but be wary, as the £150 allowance is inclusive of any VAT charged.