We’ve made a list of festive expenses that you may be able to claim back as a business expense.
Christmas time can be a busy and expensive time for many businesses – big or small. But with the January Self-Assessment Tax Return coming up, here are some festive expenses that you might not have thought about reclaiming.
Decking the Halls
If ‘business as usual’ has resumed in your office, then you may have decided to also carry on the festive tradition of decorating your office for the holidays. What you might not be aware of, is that you can actually claim back decorations like a Christmas tree, tinsel, and wreathes as tax by logging them on your accounts as running costs for the office. Bear in mind that this doesn’t extend to employees working from home however, as HMRC judges this as personal enjoyment, not office related.
A Christmas Party
Providing that you went ahead with a Christmas do this year, be it virtual or in person, you may be liable to claim expenses back as tax. However, this depends on who was in attendance.
If the event is/was open to all of your employees, then the whole thing will be taxable, no matter the number of people in your operation. However, you cannot claim expenses if there were also clients and/or associates in attendance, as this is not acceptable for corporation tax or VAT purposes as HMRC classes this as business entertaining. Furthermore, any even that is not open to all employees will also not be liable.
As a result – if you do decide to invite clients and/or associates to a Christmas event, remember to allocate sufficient funds to cover their expenses because you won’t be able to claim any tax relief, or reclaim any VAT on costs. Bear in mind that you should still record this in your books, and add the costs back on when you come to calculate your profit for tax.
As it is Christmas, you may choose to buy gifts for staff or clients. In the case of clients, you are able to record these as a business cost on your books, provided that these gifts meet the appropriate guidelines so as not to constitute potential bribery. This means:
- You must not spend more than £50 (p.a.) on gifts for any one client.
- You must not gift a client an item that can be exchanged for goods or money – such as cash or vouchers.
- You must include a conspicuous advert for your business. For more information regarding gifts to clients, please visit the HMRC website.
In the case of your staff, there are other key tax considerations regarding gifts:
- If the gift has no cash benefit, then it may be accepted by HMRC as trivial benefit, which means that you will not need to pay extra tax or National Insurance, or report it on the employee’s P11D form.
- If your gift does include cash payment to staff – they will be classified in the same way as regular earnings by HMRC so should be put through payroll as normal – and might require a National Insurance payment.
More guidance and information on gifts for staff can be found on the HMRC website.
If navigating this all feels a little daunting, why not entrust your bookkeeping to the professionals? You can find more information on the upcoming January tax return here, and to find your nearest Rosemary Bookkeeping business, click here.