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For your Christmas party, you don’t have any reporting requirements or tax liabilities if it is:

  • An annual event
  • Open to all of your employees
  • Costs no more than £150 including VAT per head.

If your business has more than one location, or you’re holding an annual event that is open to all your team at one location it still counts as allowable.  It is also possible to put on separate parties for different departments, as long as all of your employees can attend one of them.

If you go above £150 per head, you’ll need to do either a P11d for each individual, and they are then taxed on that as income, or alternatively you as the employer pay that tax by completing a PSA (PAYE Settlement Agreement) form.

On a related theme, business gifts aren’t normally allowed as a tax deduction from profits, but there are some exceptions.

Small items that feature an obvious advertising message e.g. branded pens, mugs and diaries are tax deductible.  Tax relief can also be claimed when giving free samples of your products to the public.  However, consumable gifts (food, drink, tobacco) aren’t eligible for the tax deduction and the total cost of all tax free gifts to any one recipient within the tax year is capped at £50.

If you’re thinking of giving business gifts over the festive period and would like some advice, please do get in touch.