Ensuring your staff party is tax free
A staff party or an annual function qualifies as a tax-free benefit for your employees providing that you meet the following conditions:
- The total cost must not exceed £150 per head, per year.
- £150 includes VAT together with any extra costs such as transport and accommodation.
- The £150 is a limit and not an allowance: if the cost is £151, the whole benefit is taxable.
- The event must be primarily for entertaining staff.
- The event must be open to all staff (in that location, if you have several branches or departments).
- The event is not just to be for directors, unless all your staff are directors.
- The cost of the whole event is an allowable expense for your business.
- You can claim back input VAT but this may be restricted where you are also entertaining customers.