Annual Party Allowance
What is the annual party exemption?
Well, below, I have targeted our most common Q&A areas to hopefully get to the bottom of any queries you may have.
How much & when can I use the exemption?
As a Director of a limited company you can claim a £150 exemption per head attending an annual event (note this is not limited to just christmas and could well be used within the summer), however, it cannot be a one off event.
The exemption is calculated on an inclusive basis for VAT (gross), therefore, the total cost per head including VAT cannot exceed £150. should the cost exceed, the full amount would be taxable via the benefit in kind regime (p11d).
As this is an exemption and not an allowance, you cannot make a claim for the full round amount, you must genuinely incur the cost and it will attract corporation tax relief.
Who can attend the annual event?
Directors, staff and guests (see below).
In order to qualify for the exemption, it cannot be a “Director only” event and circular invitation to staff members must be made.
Guests include spouses, civil partners, clients or children.
What tax relief is on offer?
If the event is solely Directors & staff, then the cost will receive VAT (standard scheme only) and corporation tax relief.
If clients are in attendance then the water is slightly muddied and you should contact your accountant at djca to discuss the apportionment of cost between staff and clients.
Important tax planning points
Firstly, use it!
Secondly, carefully plan the overall cost of your party so not to exceed the exemption cost. This planning should include all food, drinks, accommodation & travel to the event.
Should you feel the overall cost is to exceed £150 per head, a sharp piece of tax planning would be to increase the number of attendees to spread the cost per head. Alternatively, ask staff to contribute for costs above £150 to ensure no further taxation is suffered.