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TAX TIP TUESDAY: Claiming tax relief on Christmas parties

Our five minute read, Tax Tips for UK doctors and dentists will help you save tax, get you organised with your tax affairs and make you feel at ease that everything is taken care of.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice. 

The festive season is upon us, and you are probably looking forward to your Christmas party and mixing socially with your colleagues. As a practice owner, it is great to give something back to your team to show appreciation for their hard work through the year. However, it is also great to claim back tax relief, where possible. 

No matter what people say, HMRC is known to get into the festive season as well.

They have put into place some straightforward legislation relating to social functions and gatherings. This legislation relates to benefits in kind. 

What is a Benefit in Kind?

According to HMRC, a benefit in kind is a tax on employees who receive benefits or perks on top of their salary. If the benefit or perk is exempt, you do not have to report the cost to HMRC and you don’t have to pay tax and NIC on it.

To ensure your employees are exempt from benefit in kind when it comes to your Christmas party, you must ensure:

  • it is an annual event
  • the event must be open to all employees
  • the total of all events over the year must not exceed £150 per head

If you have practices in multiple locations, as long as the event is an annual event that is open to all employees, it still counts. Plus, you can put on different parties for different teams, as long as all employees can attend one event.

Some things to be aware of are:

  • the £150 exemption can not be offset against costs that exceed this, so if the party costs £500 per head, you cannot offset the first £150
  • if you have used up your £150 per head exemption on another event, you will have to report and pay the full costs of any additional events, even if the cost less than £150 per head

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