Pay for office Christmas party with taxable benefits

August 11, 2010

Companies all over the world have been slashing their expenditure since the start of the credit crunch, but that doesn't mean the annual Christmas party has to be cut as it can be paid for through taxable benefits.

Taxable benefits pay up to a particular amount per person at a Christmas party or another event, without the company being taxed. It means that the company is able to claim the cost of the company party, (as long as it remains within a certain limit) against their tax bill.

There are certain criteria in order to qualify – the party has to be an annual event and it must be open to all employees. A maximum of two parties per year is allowed.

Every company in the UK has a right to the maximum tax allowance of £150 per person including VAT. The only exclusions to this tax benefit are sole traders and companies with just directors but no employees.

The £150 per head also includes any partners attending the party, thus not just limiting the party to corporate staff. The cash can be spent on any party-related items, including drink, venue or travel.

But, if the party goes over the £150 per person limit, the company will be liable to pay tax, which could make it far more expensive. Also, as the benefits are worked out based on actual numbers attending, if there are some no-shows, the company could lose out on its taxable benefits.