Tax and VAT - The Three Letter Words
Please note: This is our understanding of the law and is for guidance only as we specialise in Events rather than VAT and Tax! We would recommend therefore that you speak to your accountant to clarify the situation.
VAT
Not all elements of an event are subject to VAT.
- Coach transport: If you are using a coach to get to the venue or even from the venue to the activity site, the coach and bus companies services are zero rated for VAT.
- Venues: If you are using a conference room where the primary purpose of hiring the room is not for catering then element of your bill is zero rated for VAT – unless the venue has opted to apply VAT.
Christmas Party Allowance
Remember – Christmas can come more than once a year in the eyes of the tax man!
The technical wording:
This applies to an annual party or similar annual function(s) provided for and available to all employees, or available to all employees at a particular location.
- Where in the tax year only one annual party or similar annual function to which this section applies is provided for the employer's employees, or the employees in question, no liability to income tax arises in respect of its provision if the cost per head of the party or function does not exceed £150.
- Where in the tax year two or more such parties or functions are so provided, no liability to income tax arises in respect of the provision of one or more of them ("the exempt party or parties") if the cost per head of the exempt party or parties does not exceed £150 or £150 in aggregate.
- For the purposes of this section, the cost per head of a party or function is the total cost of providing - the party or function, plus any transport or accommodation incidentally provided for persons attending it (whether or not they are the employer's employees) - divided by the number of those persons.
- That total cost includes any value added tax on the expenses incurred in providing the party, function, transport or accommodation.
In short....
As long as everyone from an office or area is invited, up to £150 per person attending, can be spent on a ‘team building’ event(s) each year. This is not then liable for income tax as a benefit in kind for the employee and the input VAT can be reclaimed by the employer. The £150 is, unfortunately, inclusive of VAT.
Take Care
Beware though as if the ‘event’ is deemed to be a reward, incentive or bonus the employee is liable to tax as a benefit in kind and the employer would not be able to reclaim the input VAT.
