What staff entertainment is an allowable expense?

Staff entertainment is a fully allowable expense as long as it meets the following criteria:

  1. Open to all employees
  2. Total cost per attendee is no more than £150 per tax year
  3. An annual event

The total cost can be applied to multiple events within a given tax year, so long as they meet the other criteria. All VAT, transport and accommodation costs must be included when calculating the total cost.

It would be reasonable to assume that a business with one Director (and partner) would normally hold staff entertainment in the form of an office party and probably invite on average 2 other guests. Guests can be staff and relations of staff.

Although it is not specified in law just how many people can attend it is our view that an amount of £300 – £600 per annum for staff entertainment in total is reasonable if you are a sole director/shareholder company. For example, if your total turnover is around £50,000 then £300 is reasonable in our opinion, ie 2 guests. However, if your turnover is higher, then we think £600 (4 guests) is very reasonable.

Also, these are claims for specific parties and company celebrations, not regular monthly costs.

You should keep a record of the overall cost of the party/event and keep a record of who attended.

Keep receipts and make sure you don’t go over the £150 per person. If you do exceed this amount then the whole amount is taxable, not just the portion over £150!

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