insideKENT Magazine Issue 56 - November 2016 | Page 173

BUSINESS WILL THE VATMAN BE WELCOME AT YOUR CHRISTMAS PARTY? Rick Schofield GOD REST YE MERRY VATMAN, THE SEASON OF GOOD WILL IS SOON TO BE UPON US AND WITH IT COMES OFFICE PARTIES AND STAFF CELEBRATIONS. BUT, WHEN SUCH CHRISTMAS CHEER IS USUALLY ASSOCIATED WITH TERRIBLE DANCING AND MISTLETOE, IT’S A FAIR BET THAT THE PHRASE ‘TAX ADVANTAGES’ WAS NOT HIGH ON YOUR LIST OF MEMORIES OF CHRISTMAS PARTIES PAST. But let it not be said that the VATman is immune to a bit of good cheer and generosity at this time of year – in fact it is true that the opposite is the case in some instances. It might surprise you to learn that the VATman could actually afford you a few savings on your Christmas party. But, before you get carried away, remember the timehonoured phrase, ‘terms and conditions apply’. You need to be very careful, as normal business entertainment of clients or other external contacts does not enjoy any tax advantage – it is only when you start providing entertainment for your employees that things change. Why? Again, the reason may surprise you. The VATman regards entertainment to reward staff for good work or to improve morale as a ‘business purpose’ and the costs involved can all be treated accordingly. Great news, but how can this be applied to your workplace? Firstly, you need to make sure that any benefits strictly applies to your staff and your staff only. If external guests are invited or, more likely, if your staff can bring spouses or partners to the festivities, you get back into the world of business entertainment and you need to start dividing up the costs so that you only claim back on the proportion that has been spent on your staff. One possible way round this would be to levy a charge, say a nominal £5 or £10 a head, for the guests, plus VAT of course, as you are now providing a service. As their ‘fun’ is no longer free of charge, it would not count as business entertainment. The event in question also needs to be open to all staff. In a phrase that should be framed and put on the wall at every motivational seminar, the HMRC declares that, “partners or directors do not need to reward or motivate themselves with entertainment”. So, if you are minded to keep it to the C-Suite, be prepared to pay for privilege. At the end of the day, the tax and VAT treatment of the Christmas party will be – and should be – low down on your list of priorities when planning the fun and games. You will be thinking first and foremost about rewarding staff, getting everyone together to enjoy the evening, ensuring good relations around the firm. But, having one eye on the costs and wanting to be efficient in how 173 you sort them out does not turn you into Scrooge. It is just common sense and, with luck, will leave a bit more in the tank to carry on the tradition next year – or, at least, pay for a new photocopier! If you would like any more information regarding VAT application to Christmas parties, or indeed any other area that may affect your business, then why not contact Rick Schofield at Wilkins Kennedy to see how we can help. Email [email protected] or call on 01233 629255. www.wilkinskennedy.com