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