Christmas is a-coming and the work party is sounding expensive! But did you know that HMRC allows you to claim your work Christmas party as a tax-deductible expense?

The work Christmas party might be a love it or hate it kind of social event amongst staff, but without one, your staff could end up feeling a little unappreciated. These annual festive gatherings can be a fantastic way to reward your team.

While it can be quite expensive to treat the team in this way, there is a potential tax relief. However, there are criteria to meet to ensure you’re eligible.

Here’s what you need to know to ensure your work Christmas party meets the eligibility criteria and how to record the event for tax purposes.

Criteria for claiming a tax-deductible work Christmas party

To claim your Christmas party as a tax-deductible expense, you’ll need to meet HMRC’s criteria:

1. The event must be annual:

Your Christmas party should be an annual tradition. Whether it’s a festive lunch, dinner, or a full party event, the key is that it’s a recurring celebration, marking the season for your team.

How to prove it

Keeping records each year will prove that the event is recurring. This might include receipts, invoices, and any formal invitations sent to employees for the event.

If possible, document the Christmas party in your company’s internal policies or employee handbooks as an official annual event. Alternatively, storing past communications, like emails or calendar invites, can also serve as proof that the party happens yearly.

Having a solid paper trail and digital documentation reassures HMRC that the party is genuinely a recurring event rather than a one-off or irregular celebration.

2. The event must be open to all employees:

To qualify, the event must be inclusive and open to all employees. This helps ensure that all team members feel valued and have the opportunity to participate.

How to prove it

Send an email, letter, or internal message inviting all employees, and keep copies of these invitations. This shows that everyone had the opportunity to attend.

You can also maintain a list of RSVPs or an attendance sheet. While employees are not required to attend, tracking responses shows that everyone was invited.

If your company has a policy or tradition around annual events, mention the Christmas party as an event open to all employees in these documents. This policy can serve as an official record for HMRC.

If you announce the event in a team meeting or circulate it in department notices, keep minutes or notes from these discussions, confirming it was communicated to all employees.

3. Max of £150 per head:

The government has a list of allowable benefits for staff. On top, there is an allowance of up to £150 per person from HMRC. This includes food, drink, entertainment, and travel costs if applicable. Be sure to stick within this limit, as exceeding it will disqualify the entire event from tax relief rather than just the excess amount.

How to prove it

Collect and keep itemised receipts or invoices for all party expenses, including food, drinks, venue hire, and entertainment. This provides an exact breakdown of costs.

Keep a record of everyone who attended the event, including employees and any partners. The total number of attendees will help you calculate the per-head expense.

Summarise your expenses by dividing the total event cost by the number of attendees to show the per-head amount.

If you covered any travel or accommodation, itemise these separately but include them in the per-head calculation, as HMRC requires these to be counted in the £150 total.

4. Include your spouse or partner:

Your partner or spouse is also welcome to attend. They even get their own £150 allowance. This is a great way to extend the festive cheer to your employees’ partners, making it a family-inclusive event. However, this doesn’t extend to clients.

How to prove it

Send invitations clearly stating “spouse or partner,” and avoid terms like “guest” or “plus one,” which could imply a broader invite. Save these invitations as proof of the intended guest type.

In any communication (e.g., emails or internal memos) about the party, specify that plus-ones are limited to spouses or partners. This shows that the event isn’t open to clients or non-employees.

Keep a list of RSVPs where employees confirm their attendance and the name of their spouse or partner. A record of confirmed attendees provides clarity about who was invited and attended.

If your company has guidelines on guest invites for staff events, make sure it notes that only spouses or partners are eligible for events like the Christmas party. A written policy is a great reference point if questioned by HMRC.

Keeping records of your Christmas party for tax-relief

• Keep receipts for all expenses:
  Retain all receipts related to the party, including food, venue hire, entertainment, and transportation costs. These will serve as proof of expenses and help you calculate the total cost per head.
• Update your bookkeeping regularly:
  Make sure to record the party expenses in your accounting software or send them to your bookkeeper promptly. By updating your records, you’ll have an accurate view of your expenses for the event and prevent any oversights.

Keeping accurate records is essential to ensure you’re fully compliant with HMRC’s guidelines. Here’s a quick checklist to help you:

With careful planning, your work Christmas party can be a tax-efficient way to celebrate the season with your team.

Be sure to stay within HMRC’s guidelines, and you can enjoy a festive, compliant celebration that rewards your employees without adding extra financial stress.