As Christmas approaches let’s get the facts straight: Does the £150 tax free exemption apply to one-man bands the same as with a large company?
 

Many UK companies keep the cost of any Christmas party within the taxman's £150 exemption. This means that their staff will not be hit by a benefit in kind tax charge. What happens though to those who own their own Limited company and are the sole employees?
 

Happily the exemption applies just the same. Under S.264 of the Income Tax (Earnings and Pensions) Act where, in the tax year one or more parties or similar functions is/are provided for the employer's employees, no liability to income tax arises in respect of its provision if the total cost per head attending the parties or functions does not exceed £150 in aggregate.
 

In addition your spouse or partner can come along too - tax and NI free!
 

For Corporation Tax purposes the Christmas party can be claimed as a tax deduction. For Personal Tax if you go a penny over the limit then the whole amount becomes a taxable benefit in kind. If you’re not careful that last bottle of bubbly could land your employee with a tax and National Insurance bill of up to £300 and the company with an NI bill of £41 per person!
 

One way to ensure the cost to the company stays within the exemption is to book the hotel, restaurant etc in the company name and the director should be authorised to pay the bill personally. He/she can then claim back the £150 per head from the company but the claim must be supported by receipts. This is not recommended if you are not a one-man band.
 

Have a merry Christmas party!