Christmas Party Tax Allowances for UK Limited Companies

Christmas Party Tax Allowances for UK Limited Companies

14:34 PM, 22nd December 2022, About A year ago 1

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What is the tax allowance for Christmas Parties for UK limited companies?

ANSWER (provided by “Artificial Intelligence”)

In the United Kingdom, limited companies are generally allowed to claim tax relief for the costs of entertaining employees, including the costs of Christmas parties, as long as the entertainment is provided for the benefit of the employees and is not lavish or extravagant.

The tax relief for business entertainment expenses is currently capped at £150 per employee per year, including VAT. This means that if a limited company holds a Christmas party for its employees and the total cost, including VAT, is less than £150 per employee, the company can claim tax relief on the full amount. If the cost exceeds £150 per employee, the company can only claim tax relief on the first £150 per employee.

It’s important to note that this tax relief applies only to the cost of entertaining employees, and not to the cost of entertaining clients or other non-employees. In addition, the tax relief does not apply to the cost of providing food or drink to employees on a day-to-day basis, as this is considered to be a tax-free benefit.

We then asked “What is the HMRC Manual reference number to explain this?”

Our Artificial Intelligence system gave the following answer …

This guidance is contained in the Employee Income Manual EIM21691, which is published by the HM Revenue and Customs (HMRC).

It explains that expenses for Christmas parties and other annual events are eligible for tax relief, subject to a limit of £150 per person, including VAT.

If you would like to read more about the rules for claiming tax relief on expenses incurred by limited companies in the United Kingdom, you can access the Employee Income Manual on the HMRC website.

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Howard Harris

22:50 PM, 26th December 2022, About A year ago

Where the cost inclusive of VAT is over £150 the entire amount (not the excess) is a taxable benefit in kind.

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