Your staff summer party in your accounts is tax deductible
Planning a staff party this summer?
Normally, business entertainment is not a tax-deductible expense. However, the cost of entertaining your employees (including directors), for example by having a staff party, is an exception.
Whether your business is run as a company or an unincorporated business (such as a sole trader or a partnership), the cost of such an event in your accounts is tax-deductible – great news!
Also, by concession, HMRC allows unincorporated businesses a tax deduction for entertainment costs relating to the business’s owners where they are part of a larger cost relating to staff entertainment. For example, if the partners of a firm attend an entertainment event put on for their employees.
What about the position for your employees?
If you provide employees with a perk – such as a staff party - it’s a taxable benefit. But as you’re probably aware, an exemption applies. The main conditions of the exemption are that:
the party or similar is an “annual” event
all employees are invited (but separate events can be held for different departments on different occasions)
the average costs (including transportation and other related expenses) of the event (events if there’s more than one in a tax year), per head for all employees and guests attending does not exceed £150 including VAT.
So go on, you know it makes sense – enjoy the glorious sunshine while it lasts!