Self-employed contractors entitled to an early Christmas present from the taxman
With the prospect of the 2019 Loan Charge and private sector roll-out of Off-Payroll looming over Christmas, contractors might be forgiven for thinking the Ghost of Christmas Past will be paying Hector a visit this year. But its not all humbugs – whilst not renown for his generosity, the taxman actually offers a fairly decent tax treatment for “annual parties” – once a year, a business may throw a staff party and claim £150 per head tax-free (inclusive of VAT).
Contractors who operate through their own limited company (outside of IR35), partnership or as a sole trader will be entitled to claim this expense against their profits. Here are some of the other conditions:
- The total cost must not exceed £150 per head, per year
- The £150 includes VAT together with any additional costs such as transport and accommodation
- The £150 is a limit and not an allowance: if the cost is £151, the whole amount is taxable
- The event must be for entertaining staff
- The event must be open to all staff (in that location, if you have several branches)
- Events for directors only are not included, unless all your staff are directors
- The cost of the whole event is an allowable expense for your business
- You can claim back the VAT but this may be restricted if you are also entertaining customers
Contractors are encouraged to take advantage of this rare display of benevolence from Her Majesty’s Revenue and Customs over the holiday season, or at the very least, before your business’s year end. Just don’t forget to tip your glass to Hector.
21 December 2018.
Sources:
http://www.legislation.gov.uk/ukpga/2003/1/section/264
https://www.rossmartin.co.uk/employers/benefits-shares/81-parties-and-annual-functions
