Can My Business Claim a Christmas Party as a Business Expense?

Can My Business Claim a Christmas Party as a Business Expense?

'Tis the season… for cold weather, hot chocolate and office Christmas parties! And if you're like most business owners, you're probably wondering if you can claim your company's Christmas party or Christmas dinner as a business expense. Luckily, the answer is yes... sort of. Here's what you need to know.

The party can’t cost more than £150 (including VAT) per person. This is probably the trickiest rule to navigate. If your company has over 100 employees, you might be thinking that it would be impossible to throw a party that everyone could attend for less than £15,000. But don't worry, there are ways around this. You could host the party at a restaurant or venue that offers group discounts, or you could do a potluck-style party where employees bring their favourite dishes. Whatever you do, just make sure that the per-person cost stays below £150.

The party must be an annual event, such as a Christmas party or a summer party. This one is self-explanatory as your company's Christmas party qualifies as an annual event, so you're good to go there. However, if you're thinking of claiming a one-time event like a team-building retreat or an employee recognition ceremony, please check with us before making the claim as there may be other criteria to meet.

The party must be open to all of your employees (and must consist mostly of employees). The purpose of the HMRC exemption is to encourage social events for employees, so the emphasis should be to include as many employees as possible. That being said, you are allowed to invite a few non-employees, like clients or suppliers. Just make sure that they don't make up more than 20% of the guest list.

Shareholders are not included in the exemption if they aren’t employees or directors. So if your biggest shareholder is also your brother-in-law who doesn't actually do any work for the company, sorry... he'll have to pay tax on his share of the Christmas fun.

You can claim an additional £150 (including VAT) per person for a plus one if they are family members or partners of your employees.

As long as you follow the rules laid out by HMRC claiming your company's Christmas party as a business expense is perfectly legal and can even save you some money come tax time. So go ahead and celebrate...your business will thank you for it!