Don’t give the taxman reasons to be cheerful this Christmas

Date: December 17 2007

A LEADING North West chartered accountancy firm is urging business bosses to think smart and avoid being taxed for treating staff to Christmas parties this year.

Christmas is a time of excess; excess drinking, excess eating and excess spending. However chartered accountants and business advisors Mitchell Charlesworth are reminding bosses to keep their spending under £150 per head on parties or risk an expensive tax bill in the New Year.

Tim Adcock, tax partner at the Liverpool office of Mitchell Charlesworth said:  “It’s easy to get carried away at this time of year; there’s a relaxed atmosphere and the Christmas party is a fantastic way of boosting morale and saying thank you to staff for their hard work throughout the year.”

“However organisers have to be cautious; the tax man does not relax his rules just because it’s Christmas.”

UK tax guidelines state that staff entertaining of any form from small lunches to a full blown Christmas bash is not exempt from tax, unless costs are kept below £150 per person.

This is the maximum amount that can be spent annually and is calculated simply by dividing the total cost of an event by the number of attendees. Exceeding this amount by only a penny will result in the whole event being taxed.

Therefore if organisers have already spent £70 per head on a summer party, they will have to ensure the Christmas party costs £80 or under per head. If there have been additional events throughout the year organisers must be prepared to pay the tax duty on them.

Although bosses can feel free to give employees seasonal gifts like turkeys, bottles of wine or chocolates as the taxman considers these to be trivial items were tax need not apply.

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