Are Christmas parties tax deductible?

Christmas parties are a great way to show your employees how much you appreciate their hard work throughout the year. Not only do they provide a fun and festive environment for everyone to enjoy, they can be a bonding experience for team members, and it can also help staff get to know each other better. Business owners are often left wondering, are Christmas parties tax deductible?

Yes is the answer provided certain conditions are met. These are:

  • The primary reason for the celebration has to be for the company’s staff.
  • The cost of the event per person should not exceed £150. The £150 needs to include VAT and other costs such as transport, accommodation, food and drink.
  • The event should be open to all staff not just directors or senior managers.
  • The party or social event has to be annual e.g Christmas party or summer barbecue

If the cost of the event per person exceeds the £150 by even 1p, ie £150.01, then the cost of the whole event cannot be deducted for tax purposes.

A company can hold more than one annual event and be eligible for the deduction as long as the aggregate cost per person is no more than £150 per head.

If your business has more than one branch, an annual event that’s open to all of your staff based at one branch still counts as exempt. You can also put on separate parties for different departments, as long as all of your employees can attend one of them.

The rules surrounding business expenses can be quite complex, so do not hesitate to contact us if you have any questions or need help figuring out what you can/cannot claim.