This is the time of year when many companies hold their annual Christmas celebrations for employees. However, it is advisable to seek advice before entertaining to ensure that your hospitality is tax allowable. There is provision for a company to hold an annual celebration for employees which is free of charge as long as there are no customers at the event. If the celebrations are only once a year and are classed as an ‘annual event’ then the celebrations will not have to be included on the annual submission of forms P11D, Benefits in Kind.
According to HM Revenue & Customs, any event which is subsidised by the company or free of charge will be classed as a benefit to be included on form P11D. In addition to being classed as an annual event, the celebrations should be open to all employees and the cost should remain below £150 per head, inclusive of Value Added Tax.
Many companies also give a gift to employees at Christmas as a gesture of goodwill such as a turkey, chocolates or a bottle of wine. HMRC allows that this is a ‘trivial benefit’ which doesn’t have to be included on the Employee Benefits form P11D. However, beware of being too extravagant as this could be classed as a benefit, which is taxable.
Small business accountants can help you to enter the entertainment expenditure in your accounts so that you know exactly what you are allowed to claim as a legitimate expense. For many businesses, a small business accountancy will prepare their accounts and will provide advice well before Christmas.
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