Planning a Christmas party for your employees is a fantastic way to celebrate the year’s achievements and thank your team for their hard work. But what about the VAT? Can you recover it, and are there any rules to follow? Here, we’ll answer some of the most common questions businesses ask about VAT and staff Christmas parties.

Can I recover VAT on my staff Christmas party?

Yes, you can recover VAT on the cost of your staff Christmas party as long as the party is available to all employees. Unlike other tax rules, there’s no monetary limit per person for VAT purposes, so you’re not restricted by the £150-per-head rule that applies to direct tax. However, this rule only applies to employees, so any additional guests attending may limit how much VAT you can recover.

What if guests (like partners or family members) are invited?

If guests are allowed to attend alongside employees, VAT recovery becomes more complex. The recoverable VAT is proportionate to the number of staff attending compared to the total number of attendees. For example, if 10 staff and 10 guests attend, only 50% of the VAT can be recovered. It’s essential to keep accurate records of attendees to calculate this correctly.

Are drinks included in the VAT recovery?

Yes, VAT on drinks can also be recovered, provided the drinks are part of the overall cost of the party. If the drinks are invoiced separately, ensure the invoice is addressed to your business and clearly indicates VAT.

Do I need a VAT invoice to claim?

Yes, to recover VAT on your Christmas party, you’ll need a valid VAT invoice from the venue or supplier. The invoice must be addressed to your business, not an individual, and clearly show the VAT amount. Without this, you won’t be able to claim back the VAT.

Are there any restrictions on the type of event?

The type of event doesn’t typically affect VAT recovery, as long as it’s a genuine staff party and not overly extravagant. The key is that it must be for employees and not solely for directors or select team members.

What happens if the party is only for directors or a small group?

If the event is exclusively for directors or a subset of employees, the VAT on the costs may not be recoverable. To ensure full VAT recovery, the party must be open to all staff members, regardless of their role or department.

Can I claim VAT if the party is held virtually or includes take-home items?

Virtual parties and delivered party packages have become more popular in recent years. You can still recover VAT on these costs as long as the event is for employees and a valid VAT invoice is provided. The same rules apply to any physical items sent to employees, such as hampers or meal kits, provided they are part of the overall celebration.

What about other staff gifts or bonuses? Are these covered?

While this blog focuses on Christmas parties, it’s worth noting that VAT recovery on gifts and bonuses follows different rules. Gifts worth less than £50 (excluding VAT) per person can qualify for VAT recovery, provided they aren’t given as part of a contractual obligation or in exchange for work. Bonuses, however, are treated as wages and aren’t eligible for VAT recovery.

Are there any pitfalls to watch out for?

To avoid issues with VAT recovery:

  • Ensure proper documentation: Keep all invoices and records related to the party.
  • Calculate guest adjustments: If non-employees attend, calculate the proportion of VAT that’s recoverable.
  • Avoid overclaiming: Only claim VAT on costs directly related to employees.

What if I’m unsure about the VAT rules?

VAT rules can be tricky, especially when navigating the specifics of employee benefits and events. If you’re unsure about your eligibility to recover VAT or need help with calculations, consulting a VAT expert is highly recommended. At Ashdown VAT Consultancy, we’re here to help you navigate these complexities and ensure you’re compliant while maximising your VAT recovery.

Need Further Assistance?

If you have more questions about VAT and your staff Christmas party or need tailored advice for your business, get in touch with us at Ashdown VAT Consultancy. Our team is ready to assist with all your VAT needs, so you can focus on celebrating the festive season stress-free.