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Claiming Festive-Season Expenses Through Your Limited Company

Limited Company

The rules surrounding the tax treatment of limited company expenses can appear confusing and arbitrary, and it’s important to understand them before you incur the expense. So, with the festive season just a few weeks away, it’s time to take a look at your seasonal expenses so you don’t cause yourself a problem or miss an opportunity.

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Can your limited company host a Christmas party?

Attending a client’s Christmas party could have an unwanted effect on your IR35 status, just like any other action that makes you look more like an employee, and we’d generally advise against it. However, if you hold your own “annual event” the cost is exempt from tax and NI, as long as you follow a few guidelines.

What counts as an annual event?

An annual event is a defined as a regular event for all company employees to attend which will be paid for by the company. The event must be open to all the company’s employees, but as you’re a contractor, it’s unlikely that your limited company will have many employees.

Your annual event doesn’t necessarily have to be a Christmas party, and you don’t necessarily have to limit yourself to one per year. For example, you could have a summer barbeque as well as a party in December.

How much can you spend?

The tax-exempt amount is £150 per head. It’s important to remember that this is an exemption and not an allowance, which means you should claim the amount you actually spent, and if you spend more than £150 per head, you’ll be liable to pay tax and NI on the whole amount.

If you hold more than one annual event, the total cost should be no more than £150 per head.

Who can you invite?

As the director of your limited company you’re entitled to provide an event for yourself, any staff you employ. HMRC guidance also states that members of your family and household may attend as guests.

Are Christmas gifts tax deductible?

Generally, gifts to customers are not tax deductible, but your gifts may qualify if:

  • They incorporate a conspicuous advertisement for your business (for example a branded umbrella or mouse mat).
  • The cost of the gift does not exceed £50.
  • The gift does not include food, drink, tobacco or a voucher that could be exchanged for goods.

Gifts to employees are tax deductible, but they may create a benefit in kind for your employee unless:

  • The cost of the gift is less than £50
  • The gift does not contain cash or a voucher that can be exchanged for cash
  • The gift is not in return for salary sacrifice, or related to work carried out

Orange Genie Accountancy Clients

If you’re lucky enough to be a client of Orange Genie Accountancy, make sure you check the Orange Genie Edge Discount Outlet for offers or cashback before you purchase any gifts or book an event. The Discount Outlet is huge and constantly evolving, so it’s well worth checking it regularly.

If you have any questions or if we can help in any way, please call our expert team on 01296 468 483 or email info@orangegenie.com.



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