CHRISTMAS PARTY TIME – WITH HELP FROM THE TAXMAN
Last Christmas I looked at the subject of charitable gifting, and the nice stocking filler which the taxman gave you on top of this. This year I will look at another Christmas present.
The company Christmas party season is coming up. Many of us are aware of the £150 allowance per year for annual events such as this.
Jones Limited is owned by Griff. He has 8 employees, plus himself, all of whom attend the party, with the meal, free bar and hotel all thrown in. It is a good night, greatly boosting team morale. The total bill came to £1,440, which is more than £150 each. Not a big deal, Griff thinks, as the excess is only £10 over the allowance, so tax on that won’t be too bad.
However, Griff gets a nasty shock when he is told that the full £160 is taxable on each employee, and he is faced with the prospect of either telling all the employees of this extra tax charge – and so destroying most of the goodwill built up at the party – or the company paying the tax itself on a ‘grossed up’ basis, which is even more expensive than he first thought.
To avoid any embarrassment with his staff, the company picked up the Income Tax and National Insurance bill, which was in excess of £1,000. That’s most of the budget for next year’s party, and, so, the employees will just get a turkey next year.
Smith Limited is owned by Mel. She also has 8 employees, plus herself, all of whom attend the party, and again it is all expenses paid. Another wonderful night, and the total bill comes to £2,240. Surely, a nasty tax bill awaits Smith Limited as well.
However, it turns out there is no tax charge on anyone, and the cost is still a tax allowable expense for Smith Limited. Has Mel’s accountant had too much Christmas spirit when he told her this?
No, he was perfectly sober and perfectly correct. The difference compared to Jones Limited, was that Mel had invited partners to the party as well. Tom, well Tom never seems to get a girlfriend, and Sarah has just gone through a messy divorce, but everyone else brought partners to the event, making 16 attendees. So the average cost was £140 per person, and the £150 limit is ‘per head’ not ‘per employee’, so all within the permitted limit.
So, for other presents courtesy of the taxman please call Des Machin t. 0800 019 1744 or email firstname.lastname@example.org and let’s arrange a free of charge initial consultation