Businesses warned to stay under the limit this Christmas

29/11/2007

Companies must be wary about going over the tax-free amount they spend on staff parties this Christmas, the Institute of Chartered Accountants in England & Wales (ICAEW) has warned.

The HM Revenue & Customs (HMRC) allows companies to spend £150 per head each year tax-free for staff parties. This figure must include food, drink, accommodation, transport and also VAT.

The rules apply to all annual parties and must be open to all members of staff. All other parties must either be included in this amount, or be taxed. The rule is available to businesses of all sizes. With events that offer opportunities to entertain staff taking place throughout the year, such as the Rugby World Cup, budgets may well be stretched the ICAEW suggested.

Clive Lewis, head of medium issues at the ICAEW feels that all businesess should embrace the ‘gift’ from the HMRC: “Not only is having a Christmas party a morale booster to staff it is also a reward for the hard work that has been put in over the year. Businesses should make the most of the tax-free amount and not just resort to some warm wine and plastic cups in the office.”

Mr Lewis added: “Whatever you decide to do for your Christmas party be sure to take advantage of this present from HMRC.”

Gifts which employers give, however, will be taxable. Cash presents such as bonuses and vouchers and other presents such as bottles of wine, chocolates or a turkey will all be subject to tax.