I have a limited company but I am the only employee, can I still have a Christmas party for myself and my wife and claim tax relief?
Happy Christmas from Santa…yes you can!
Not only is the cost of the party deductible against the company’s profits, there is an exemption from tax and NICs on the benefit provided, as long as the party or function:
• is an annual event,
• is open to all of your employees (even if you are the only one); and
• costs no more than £150 (inclusive of VAT) per head.
If partners or spouses attend then they also have a £150 allowance.
You must include in this £150 per head allowance;
- the cost of the meal etc,
- accommodation, and
- transport to and from the party
i.e. all the costs.
This is an annual allowance, per person, to cover all staff events. If the company spends even £1 more than the £150 per head allowance then the whole amount will be taxable on you, though this could be avoided if you paid the excess yourself.
The company can also recover the VAT on the element relating to you as an employee, but not the element relating to your spouse.
P.S. Scrooge says…
The tax exemption does not apply to sole traders and business because they are not employees.