When times are tough and businesses are looking to make savings, events like the office Christmas party are one of the first things to get cancelled. Yet what many businesses don’t realise is that they can claim back the VAT for staff on their Christmas parties, and can backdate a claim by up to 4 years.
The rules on what can and can’t be claimed back on Christmas entertaining and staff gifts are not straightforward. From a VAT perspective, the expenditure on non-employees is viewed as entertainment and cannot be claimed back, so you will need to show the split between employees and their non-employee guests to make a claim. If the entertainment is limited only to the partners or directors of a business then the VAT incurred is not input tax and cannot be recovered. However, if partners or directors attend staff parties along with other employees, the tax is viewed as input tax and is recoverable.
And, should you be splashing out on a Christmas gift for staff, then it’s worth remembering that there will be no VAT on gifts under £50.