Can I Reclaim VAT on Christmas Party Expenses?

can i reclaim vat on Christmas party expenses?

As the festive season approaches, you may be starting to plan your annual Christmas party. It’s a time to celebrate the year’s successes, boost team morale, and thank employees for their hard work. But what about the VAT on those yuletide festivities? We’re often asked Can I reclaim VAT on Christmas party expenses?

In this post, we’ll explore the ins and outs of VAT reclamation for your company’s festive events.

Understanding VAT

Before delving into the specifics of reclaiming VAT for Christmas parties, let’s briefly recap what VAT is. Value Added Tax is a consumption tax levied on the value added to goods and services at each stage of production or distribution. In the UK, the standard VAT rate is currently 20%, and it applies to many goods and services, including those related to your company’s events.

Claiming VAT on Business Expenses

In the UK, businesses can usually reclaim the VAT they’ve paid on certain business expenses. To be eligible for VAT reclamation, an expense must meet specific criteria:

  • It must be a business expense
  • The supplier must be registered for VAT and able to provide a VAT invoice.
  • It must be incurred for a legitimate business purpose

So, where does the company Christmas party fit into this framework?

And, can I reclaim VAT on Christmas Party Expenses?

Unfortunately, HM Revenue and Customs (HMRC) imposes some restrictions on reclaiming VAT for entertainment expenses, which generally includes events like Christmas parties. While the cost of the party itself may not be recoverable, there are certain circumstances in which you can reclaim VAT:

Entertaining Clients

If the party is primarily aimed at entertaining clients or prospective clients, and it includes business discussions, the VAT on those costs may be recoverable. It’s essential to document the business nature of the event.

Staff Parties

In the case of staff parties, VAT can be reclaimed if the total annual expenditure on employee events is less than £150 per attendee (including VAT). This can include multiple events, but it must be an annual per-head limit.

Optional Activities

If you organise optional activities as part of the Christmas party, like an excursion, and these activities are also available to non-employees (e.g., clients or family members of staff), the VAT on these costs may be recoverable.

Keep in mind that the rules around VAT can be complex and subject to change, so it’s wise to consult with a tax expert or your accountant for the most up-to-date guidance and advice specific to your business.

Final thoughts on can I reclaim VAT on Christmas Party Expenses?

While the general rule is that you cannot reclaim VAT on Christmas parties, there are exceptions to this rule, particularly when the event has a business purpose or when it involves entertaining clients. For staff parties, there’s a per-head limit that can be reclaimed. However, it’s crucial to keep accurate records and be transparent about the business nature of your event to ensure compliance with HMRC regulations.

Before your company’s Christmas party kicks off, it’s a good idea to consult with your accountant or tax advisor to navigate the intricacies of VAT reclamation and make sure you’re not missing out on any potential savings during this festive season. With the right planning and documentation, you can enjoy the holiday spirit while managing your tax liabilities effectively.

Helping you with how do I pay my self assessment tax return?

Contact us now if you need help with this

Or just email us if you want our:

  • New Business Start-up Checklist, or;
  • Business Plan Template, or;
  • Help with
    • Bookkeeping
    • Software
    • Accounts
    • Taxes

Achieving Success with your business

If you’re just starting your new business venture or struggling with the steps to the next level contact us now.

We can help you with this and much more

Get ready for success with Moore Financial Management

We can help you with all of your compliance obligations such as:

But also the things you really need to increase the chances of your business being a success

These are the things that add value and the information you need in order to make the correct business decisions

If you’re not confident with any of this or don’t have the time, getting a licensed accountant to do it for you can actually save you money.  It can free up your valuable time which you can use to concentrate on your business.  You can also benefit by knowing it has been done correctly and on time.

Mistakes can be costly.

As can missing deadlines.

Allowable Expenses for Landlords

Being a landlord in the UK can be a rewarding [...]

Setting up a Website for Your Business

In today’s fast-paced and digitally driven world, setting up a [...]

Can Christmas Gifts Be Tax Deductible?

It’s that time of the year again when the festive [...]

Contact me now if you need help with Making Tax Digital