We have made a list and checked it twice of festive expenses that you may claim back as business expenses.
Christmas time can be a busy and expensive time for many businesses, big or small.
But with the January Self-Assessment Tax Return deadline looming, here are some festive expenses that you might not have thought about reclaiming.
Decking the Halls
You may not know that you can claim back decorations such as Christmas trees, tinsel, and wreaths as tax-deductible business expenses by recording them as office running costs. However, this does not apply to employees working from home, as HMRC considers these items to be for personal enjoyment rather than office-related use.
A Christmas Party
You may be eligible to reclaim expenses for a Christmas party, but this depends on who attended and the cost incurred.
If the event is open to all employees and costs less than £150, it will be entirely taxable, regardless of the number of people in your organisation.
You cannot claim expenses if clients or associates attend an event, as HMRC classifies this as business entertainment for corporation tax and VAT purposes. Additionally, if an event is not open to all employees, it will not be eligible for claims either.
Therefore, when inviting clients or associates to a Christmas event, ensure you allocate sufficient funds to cover their expenses, as you will not be able to claim any tax relief or recover any VAT on these costs.
It’s important to record this in your financial records and add the costs back when calculating your profit for tax purposes. However, this applies only if the cost per person for the Christmas party, including VAT, does not exceed £150. If it does exceed this amount, it will be considered a taxable benefit.
Presents
Since it is Christmas, you may consider buying gifts for your staff or clients.
When giving gifts to clients, you can record these expenses as business costs, as long as they adhere to the appropriate guidelines to avoid any implications of bribery.
You don’t have to pay tax on a benefit for your employee if all of the following apply:
- It costs you £50 or less to provide
- Cannot give cash or a cash voucher
- It is not a reward for their efforts or performance.
- It is not included in the terms of their contract.
This is known as a ‘trivial benefit’. You don’t need to pay tax or National Insurance, or let HM Revenue and Customs (HMRC) know.
More guidance and information on gifts for staff can be found on the HMRC website.
Need help with your finances?
If managing all of this feels overwhelming, consider handing your bookkeeping over to the professionals by reaching out to your nearest Rosemary Bookkeeping business for expert support, advice, and assistance with all your bookkeeping needs.
