The minefield of entertainment expenses
The minefield of entertainment expenses
Though we may not be able to help you plan your next staff party, we can help you plan in other ways.
June 26, 2023

Entertainment expenses can quickly become a bit of a minefield with all the subcategories from working lunches, client hospitality and arguably the most important of all – the staff party.

In this blog we will be focusing specifically on entertaining your staff and the importance of planning ahead. You may be questioning why we need to plan. If not done properly, your reward for their hard work throughout the year will leave them with the unwanted sight of a brown envelope through their letterbox.

How can this all go wrong? Well, there are several things to consider when providing entertainment for your staff.

For the event to not be a taxable benefit it must be what HMRC classes as a “qualifying Event”. This, therefore, won’t be leaving yourself or staff with a headache the next day (well they might have one for another reason):

  • The total cost of the event or events in the year must not exceed £150 per head. This includes any costs incurred such as hire of a space, the catering and transport, to mention a few.
  • The event must be open to all staff members, regardless of how many employees. You could have one or one hundred. If every member has access to the event, then it will still be allowable. (This is true even if you are the only person in the company and the other criteria are met.)
  • The event/events must be annual and not just casual. An example would be a Christmas party or summer BBQ.
  • It should be said that you can also host virtual events. This is allowable as long as every employee has been provided with the same items i.e. a bottle of wine that all equal the same value.

If any of the criteria are not met, then the total amount becomes a taxable benefit. For example, if two annual events are held each costing a total of £170 per person then the total amount would have to be declared by the employee as a taxable benefit, not just the additional £20. This is the case even if you go over by £0.01 as it will result in the expense as a whole being subject to tax and National insurance.

It is important to remember that a staff party is an exception and not an allowance.

Though we may not be able to help you plan your next staff party, we can help you plan in other ways. So, if you have any questions regarding entertainment or any other specific situation, why not get in touch with us? We are here to ensure that you do not get caught out and left out of pocket.

The information contained in this article is based on the opinion of Hive Business and does not constitute formal tax advice. Any tax outcomes will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future. You should seek specific advice before embarking on any course of action. Hive Business does not provide regulated Financial Advice, including advice on investment, insurance or lending products or their suitability for you. This article is provided for information only and does not constitute, and should not be interpreted as, investment advice or a recommendation to buy, sell or otherwise transact, or not transact, in any investment including Bitcoin and other crypto. Any use you wish to make of any information contained within this article is, therefore, entirely at your own risk.

By Andre Alderson Accountant
If you have any questions or comments about this article, please get in touch.
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