Updated: Oct 26, 2022
Christmas 2020 was tough and whilst stories of increased Covid cases and the new Omicron variant abound; Christmas 2021 might not be cancelled just yet. So what Christmas costs can your small UK business claim?
No Christmas is complete without tinsel. Even if tinsel is not to your taste, you can claim for decorations and the cost of a tree in your accounts. Just one note of caution, if you work from a home office, unfortunately you cannot claim for the cost of any decorations.
Perhaps you want to send your clients a Christmas gift, can you claim anything in the accounts? The good news is, provided you stick to the following guidelines:
The limit for any one client each year is gifts to the value of £50
You can't give gifts of food, drink, tobacco or vouchers exchangeable for cash or goods
The gift must contain a conspicuous advert for your business
The Office Party
Assuming that there are no last minute changes over the next two weeks, what can you claim in your accounts?
Staff parties - no extra tax will arise if all attendees are employees, all are invited and the cost is no more than £150 per head (and you haven't used up the £150 on another function during the year), nothing will need to be reported to HMRC. However, if you go over the £150, everything is taxable and not just the excess.
Client or non-staff parties - unfortunately HMRC will regard parties for clients or non-staff as business entertaining. This means that your business can still cover the costs of those parties, but you will need to add the costs back when calculating your profit for tax - which means that you will not get any tax relief for them.
Staff Gifts and Bonuses
For gifts without a direct cash value (e.g. vouchers) and given for personal reasons, rather than business ones, they may qualify as trivial benefits. If so, no tax or NI will be due and the gifts do not need to be reported to HMRC.
Cash-value gifts to staff would need to be reported on either as earnings or their forms P11D.
If you decide to pay your staff a Christmas bonus, HMRC regards these the same as regular earnings and you should run these through your payroll and pay the tax and NI as usual.