Christmas Parties, Christmas Gifts and VAT.

Date: 21/11/17

Christmas Parties, Christmas Gifts and VAT.

 

After a good year of trading, many businesses like to thank their staff and clients by sending seasonal gifts, or organising a party; but exactly how much VAT can be recovered in relation to these gifts and events?

A Christmas party comes under the business entertainment rules. If the party is attended by employees, or employees and directors, then the input tax on the cost of the party can be recovered (subject to the normal partial exemption rules). HOWEVER, if the party is just for directors who are also shareholders, there is no demonstrable business benefit involved, such as staff motivation or reward, and none of the VAT is recoverable. 

When it comes to sending gifts to clients or to staff, input tax is reclaimable. As long as the total VAT exclusive costs of business gifts to the same person does not exceed £50 in any 12 month period, then there is no need to account for output tax. But beware, should the value exceed £50, then output tax on the value of the gifts must be accounted for.

If you need further advice on this or any other tax issues, don't hesitate to call us on 01524 67111. We will be happy to arrange a meeting and chat over a coffee and a mince pie.

 


Wendy Hird

Author: Wendy Hird

Wendy’s exceptional knowledge and experience, gained through spending 7 years with  HM Revenue and Customs and 21 years with Scott & Wilkinson, makes her one of our most respected taxation specialists. She has worked with many...

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