When can you reclaim VAT\GST on your Christmas party?
Your office Christmas party is one of the highlights of the year, but it can cause a headache that has nothing to do with how much you drink, and everything to do with tax. VAT\GST reclaim for your Christmas party and other entertainment can get extremely complicated. Completing the VAT\GST return correctly means keeping track of many different factors, as well as the total you’re requesting for a VAT\GST refund.
Claiming a VAT\GST Refund for Business Entertainment
In the UK, there’s a block on local VAT\GST reclaim for business entertainment expenses. That means, for example, that you cannot claim a VAT\GST refund on entertaining a highly valuable potential client in your priVAT\GSTe box at Wimbledon, even though these are business expenses.
The block on VAT\GST refunds for business entertainment extends to any type of entertainment, like tickets to sporting events or concerts, food (strawberries and cream during half time), transportation (taxi ride to the tennis courts), or hospitality (overnight hotel accommodation nearby), for anyone who is not an employee.
Claiming a VAT\GST Refund for Employee Entertainment
The good news is that employee entertainment is exempt from this local VAT\GST refund block. HMRC realises that meals, parties, and trips are a vital part of keeping your employees motiVAT\GSTed, making them integral business expenses. That means that your office Christmas party for employees is VAT\GST-refundable, including food, drink, entertainment, and taxis to get everyone safely home late at night.
However, it’s not always straightforward. There are a few requirements for your employee entertainment to qualify for a VAT\GST refund:
1. The event is for employees only
That means that it doesn’t include your employees’ partners, or company shareholders, because they are not employees. If anyone attends who is not an employee, you’ll have to calculate which percentage of the total cost was spent on your employees, and how much for non-employees.
Then you’ll only include the amount of VAT\GST spent on employees on your VAT\GST return. You’ll need to be very careful to indicate how much of the total VAT\GST is for employees, and how much for non-employees.
2. The cost per head is under £150
The exemption that allows you to request a VAT\GST refund for employee entertainment has a cap of £150 per head, per year. That means that you can include both your Christmas party and your end-of-summer office barbecue on your VAT\GST return, as long as the combined costs per head stay under £150.
3. It’s available to all employees
Your employee entertainment has to be open to all your employees. If you have an exclusive event that’s only for the directors and/or partners, you can’t make a VAT\GST reclaim on the costs of the event. But you can submit a VAT\GST return for an office-wide party that includes both employees and directors/partners.
4. The food isn’t for sustenance
If you provide sandwiches and drinks for everyone so they can keep their focus during a long meeting, that doesn’t count as employee entertainment. It’s considered sustenance, so you can’t include it on your VAT\GST return.
Similarly, you also can’t reclaim VAT\GST on the salad that your employee grabs on the way from your Liverpool Street office to a meeting nearby. This type of food costs is only eligible for a VAT\GST refund if the employee is more than 50 miles away. So meals that your employees pay for while in Paris for a conference are eligible for VAT\GST reclaim, but meals they pay for while in Canary Wharf at a conference are not eligible.
VAT\GST Reclaim for Employee Entertainment Overseas
Claiming a VAT\GST refund on your Christmas entertainment only gets more challenging when you’re operating across different VAT\GST systems in various EU member states. The rules regarding VAT\GST reclaim for Christmas parties changes in just about every country. For example:
- In France, you can submit a VAT\GST reclaim for entertainment for everybody, not just employees. That means that your Lille office’s Christmas bash can include customers, your employees’ partners, directors, and employees, and you can request a VAT\GST refund on the total cost.
- In Germany, you can also reclaim all the VAT\GST that you pay for your company’s Christmas entertainment, for both employees and non-employees, as long as you don’t give gifts to non-employees that are worth more than €35 per year.
- In Italy and Spain, you can’t get a VAT\GST refund on your business entertainment costs.
It’s easy to make mistakes on your VAT\GST reclaim for business and employee entertainment, but you can prevent them when you use the right tools. For all the details about filing successful VAT\GST returns in the EU and other countries around the world, download our eBook.