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Tax for Companies – Staff Entertainment

Many businesses worry about the tax issues associated with staff entertainment. From a corporation tax perspective, a company is allowed to spend any amount on staff entertainment, on the basis that it is for the purposes of their trade. There are other rules, so for example third parties (such as suppliers or client) cannot attend.

However what is more of an issue is the benefit in kind rules. Staff entertainment provided up to £150 per member of staff per annum is allowed without a benefit in kind issue. This broadly is intended to be used for one or more annual events, such as a Christmas party. If you exceed this level, a benefit in kind issue arises.

No employer wants to impose a tax charge on their staff for attending such an event, so if you do exceed £150, you may want to consider a PAYE settlement agreement. They provide an employer with the option to pay any tax liability on the employees’ behalf. This is very common in such circumstances.

For more information on Corporation Tax, please contact the tax team on 020 8429 9245.