Can a limited company director pay for a company party?

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We know that contractors lead a busy WorkStyle, but that doesn’t mean you can’t let your hair down once in a while! After all, who doesn’t look forward to a Christmas company party?

But did you know that your limited company can cover the cost of hosting a party? Don’t worry, we’ll tell you how.

How does it work?

As long as your assignment falls outside IR35, your company can pay for various functions and events. In addition, you’ll also need to meet the following criteria:

  • You can prove that these events fall annually
  • All of your employees are invited
  • The price does not exceed £150 per head

That last point is extremely important, as even if you go over this amount by a single penny, the entire amount would be subject to tax and National Insurance payments.

Can we bring guests?

In short, yes! You and your employees can bring a partner to any event and they’ll also receive a £150 annual allowance. For example, let’s say your limited company has two people working at it (one being yourself) and you each bring a guest. You’d have a total allowance of £600.

Can I only have one party a year?

No, not at all! Your allowance can be spread across several events throughout the year. So, using the example above, you could spend £300 (inc VAT) on your Christmas party and the remaining £300 on a summer BBQ.

What kind of entertainment can the company pay for?

Your limited company can pay to entertain current or potential clients, but this isn’t tax deductable. Remember, any entertainment costs must be deemed ‘reasonable’ by HMRC so no lavish corporate days out please!

Oh, and make sure to keep your receipts too!

Get in touch

Hopefully, this guide will have helped shed some light on paying for staff parties through your limited company. If you’d like a bit more help, look no further.

At ClearSky Contractor Accounting, we’re with you all the way through your career, whether it’s with the fun stuff such as staff parties, or the not so fun things like tax. Our dedicated team of experts are on hand to answer any queries you may have, and our extended opening hours mean they’re available at a time to suit you.

For more information, please call 0800 032 5326 or email enquiry@clearskyaccounting.co.uk.

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