What Christmas Expenses Can You Claim Back?
Posted on 20th December 2021
At this time of year, many companies reflect on the year just gone. Not just from a financial or performance perspective, but thoughts turn to all the customers and staff who have contributed in the last 12 months. It’s a great time to simply say ‘thank you’ for business transacted and work carried out.
But how best to do this and what can you legitimately claim back as part of your business expenses. We thought that might be a good question to answer. So, here is our quick guide to the sort of things you can be doing and what you can claim against your business.
The Annual Christmas Party
These are always really popular and a great opportunity to get everybody together for a social event to celebrate the closing of another year. These can be claimed as an expense but there are a few factors to bear in mind:
It must be an annual event that takes place. And, it’s good to know that you can have more than one of these a year which means a Christmas party and maybe a summer one too.
Open to all employees and paid for by the company.
These events are exempt from tax and National Insurance (NI) up to the amount of £150 per person. Important to note this is not an allowance, which means you can claim up to this amount but need to show proof of expenditure. If you go over the figure then you will be liable for tax.
The allowance is not per event, so if you hold more than one annual event, the £150 is cumulative over the two events.
In the last couple of years, in-person events have been limited and this has had an impact on the office Christmas party. It has meant many companies have organised online parties as an alternative, making sure everybody can still get together for a social event.
The good news is, HMRC has said that any virtual office party is eligible for the same tax exemptions. This includes entertainment, food and equipment or, any expense related to staging this type of party. But it must be open to all employees, be an annual event and you still have an allowance of £150 per person.
Giving a gift at Christmas
As a general rule, gifts you give to your customers are not eligible for a tax deduction. But there are certain things you can do that could make them qualify:
Sending a gift that is branded with your company logo and details is deemed to be an advertisement.
The cost of your gift does not exceed £50 and you don’t spend more than this amount on one customer throughout the year.
The gift is not food, drink, tobacco or, a voucher that can be exchanged for money or goods.
Gifts you give to your employees are tax-deductible. But be careful you don’t tip it over into a ‘benefit in kind’ which will mean paying tax. To do this, spend less than £50, don’t give cash or a voucher that can be exchanged for cash, and don’t relate the gift to a salary payment or reward for work being carried out.
A non-cash gift can be given to employees and HMRC might accept these as a trivial benefit. These are small gifts given as a way of saying thank you and not related to employment. In this form, these don’t count towards your tax or NI deductions. But if there is a cash value you would need to declare it on your employees’ P11D.
Christmas bonuses for targets reached during the year are also quite popular. These should be treated as part of your regular earnings and go through payroll to ensure tax and NI are taken into account.
Decorating the office for Christmas
We spend so much time at work that decorating the office is a great way to celebrate this time of year. What’s even better is you can claim tax relief for those baubles, tinsel, lights, even that Christmas tree. Simply record it as a day-to-day running expense. But sadly, if you work from home or remotely, you can’t claim for decorations – you really have to be in the office to enjoy it!
What sort of things do you do for your staff and customers at Christmas?
Tagged as: Christmas Expenses, Christmas gifts, Christmas parties, Expenses, Non-cash gifts, VAT Returns
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