Are you considering a work Xmas party and/or giving gifts to staff or clients this year? Well here are the VAT implications of doing so… an interesting read!
Firstly, the Xmas party…
This falls under the rules of business entertainment. If it caters for employees only, then VAT included within the costs of the party can be recovered! Even where the directors attend the party.
If the party also caters for guests who are not employees, such as partners of staff or friends, the VAT should be apportioned between employees and non-employees.
As an example, if a business held a Xmas party for 20 attendees. 10 of these are employees, 2 of these are company directors and shareholders, and the remaining 8 are non-employees. They incurred VAT inclusive expenditure of £1,000. This would mean 60% of the VAT on costs could be reclaimed. In this example, that would mean they could reclaim £100 of the £167 VAT incurred.
VAT on Gifts:
In addition to receiving VAT relief on a Xmas party held, VAT can be reclaimed on Xmas gifts, given to both employees and clients.
This is only allowed if the individual receiving the gift doesn’t receive a gift worth more than £60 (inc VAT) in any twelve month period from the business in question.
So to put it simply, only provide employees and clients with an annual gift of no more than £50 (exclusive of VAT), and you can reclaim the VAT element on these gifts through your company.
Feel free to give more generously, however any subsequent gifts that result in the annual gifts exceeding a value of £50 (exclusive of VAT), you unfortunately won’t receive the same VAT relief under the current rules.
We hope this has been useful to you.
If you would like to know more about us, please contact us here at Blue Skies!