Q. We hold an annual staff summer barbecue and are planning our Christmas party. Will they both qualify as a tax free benefit?
A. It depends on the cost per head of the events, whether they are held annually and who was invited.
Firstly, an event must be an annual event (i.e. held for a specific occasion every year) or it will not qualify. If you do not have a summer barbecue every year, you will not be able to claim tax relief on it. All employees must be invited to the event, or if your company has specific branches, all the employees in that branch must be invited. There is no limit on the number of guests each member of staff can bring – they will simply be added to the headcount.
There is an annual limit of £150 per head for all attendees (including staff guests) and this includes VAT and costs for food & drink, transport and overnight accommodation, if paid for by the company. This is not an allowance, so if you spend £151 per head you will have to pay tax on the whole amount.
Let’s look at your example (assuming both are annual events) and add some figures. If your summer barbecue cost £40 per head and your Christmas party cost £120 per head, you would be better claiming tax relief on the Christmas party, as put together your total would be £160.
Q. I am a children’s entertainer and wear different fancy dress for themed parties. Can I claim the cost of the costumes as an expense in my self-employed accounts?
A. The cost of fancy dress costumes, wigs, make up and shoes is allowable if they are wholly and exclusively used for the purpose of your business. The terminology is tricky, however, as deductions are not allowed for clothing required “for warmth and decency”. If a costume includes a pair of black leather boots, for instance as part of a Mary Poppins costume, these would not be allowable as they could be worn as everyday wear.
The best thing to do is ask yourself: “would I wear this when I am not working?” If the answer is ‘yes’, the cost is not allowable. And don’t forget to keep the receipts (or a digital copy) for everything you do want to claim back.
You should always seek advice about your specific requirements before you act. Speak to one of our experts on 0161 476 9000 or contact us here.