How to leave your office party off your tax bill

July 16, 2010

Christmas party revelers may have missed out on the news a couple of years ago that that Gordon Brown raised the tax band on office entertainment, which means spendings on Christmas parties can largely be tax deductable

The former Prime Minister doubled the longstanding £75 annual tax threshold for staff entertainment to £150, but it is important for party organisers to be aware of the small print and the small number of provisos that qualify the helping hand.

The party in question must be an annual event and must be open to all staff members, or all members at one particular location.

The £150 per member of staff must apply for the whole year: it is not £150 on the Christmas alone, and then another £150 for a summer staff barbecue. The set sum includes the VAT inclusive amount of all incidental costs – these include transport, entertainment fees and any overnight accommodation needed.

The Inland Revenue now accepts that businesses throwing parties for the staff are doing so for the benefit of their business, which is what allows the VAT claimed on Christmas parties to be reclaimed.

The business cannot, however, claim the VAT back on staff relatives or partners – the benefit is solely for the company's employees.