Tax: What the self-employed can claim at Christmas

What tax allowances do the self-employed get around Christmas?

Yes, it is party season and many employers will invite and pay for their staff to attend a function. And that is the key: the £150 limit per annum is an amount which employers can spend per person without a taxable benefit being suffered by the individual.

Unfortunately, it does NOT apply to sole traders or partnerships on the basis that the expenditure is not wholly and exclusively for the purposes of trade (s34 of Income Tax Trading and Other Income Act (ITTOIA) 2005).

However, if you trade through a limited company, then this per-head concession applies as long as ALL staff are invited to the function. If the business has other staff, but the event is for directors only, then a benefit in kind would arise on the directors.

Where employees’ spouses/partners also attend you can budget up to £300; the concession is not limited to employees only. But, please note that if the amount for the event exceeds £150, then the whole cost is taxable, not just the excess.

Finally, the concession is an annual amount. If your business held another event costing £100 per head and the Christmas party was £80 per head, then the lower amount would need to be treated as a taxable benefit in kind because the annual £150 limit had been exceeded.

For more details, please see HMRC’s Employment Manual at EIM21690/1 which summarises the legislation found at s264 Income Tax (Earnings & Pensions) Act 2003. But most importantly, enjoy your Christmas party and don’t be tempted by the vintage wine and brandy as you could end up with another headache in the form of a tax bill …

Paul Mason, National Account Manager at Abbey Tax