Employers probably want to give their workforce an extra pat on the back this year. Unfortunately, conventional office Christmas parties won’t be taking place due to COVID restrictions, and employers will have to say thank you in other ways. The good news is that virtual Christmas parties can still go ahead – but can businesses still claim a virtual Christmas party as an expense? Find out here!
In a nutshell, yes.
Office parties can be classified as business expenses as long as the cost of the event per head is £150 or less. If you exceed this amount then the whole cost is no longer deductible. Everything must be included in the £150 cost, such as transport, entertainment, food and the VAT on these things.
The slightly better news is that the cost per head can be extended to people who attend the event with your staff, such as their partners. We recently wrote a blog on this subject. For a full discussion on office Christmas parties, check out our dedicated blog.
Yes, recent changes to current legislation have been made to allow virtual office Christmas parties to be classified as a business expense because of the current situation.
Christmas parties that include more than three households (which is likely to be the majority of office parties) will not be allowed over the festive period. The new rule change will allow businesses to reward their staff after a tough year and still claim up to £150 per head on any virtual get-togethers.
Remember, if you spend more than £150 per head then you won’t be able to claim any costs as an expense!
You might be surprised to hear that there are no rules specifically relating to Christmas parties. The rules are applied to one annual function each tax year. You might need to keep this in mind if you plan on having a second event before April next year.
All of the same rules apply to your virtual Christmas event. You can spend up to £150 per head on the cost of food and drink – and any entertainment that may be provided virtually.
As there will be no venue to pay for and no transport to fund, your virtual Christmas party is likely to cost a lot less than normal. This will help you stay within the £150 budget per person or it might help you to pay for better food and drinks.
Your business probably hasn’t had to come up with any virtual party ideas before and you might be scratching your head wondering what to provide.
The most obvious things you can do is to send food and drinks to everyone’s homes, possibly use the same caterer to do so. And then use video conferencing technology to eat together in the only way possible right now.
As for virtual Christmas party entertainment, you might want to consider:
Our top tip when planning a virtual Christmas party is to still give control to your staff, just like most offices do when hosting regular office events. Give them options on what food and drinks to buy, and have a vote on what type of entertainment to have.
A bonus tip is not to have the party go on for as long as a normal Christmas party would. Most people are less inclined to look at a computer screen for five hours, so make your party a little shorter.
For more information on the specifics of claiming expenses for office events, do not hesitate to speak with our team.
Yorkshire Accountancy has been helping businesses navigate the tricky area of office party expenses for years, and we are ready to help you!