Staff Entertaining – The Basics  When you organise events for your employees – such as Christmas parties or summer outings – there’s a useful tax exemption: you can spend up to £150 per person per tax year on annual events without incurring a tax charge for your employees. This can include costs for food, drink, entertainment and even transport or accommodation related to the event. 

What About Guests?  You may wish to let your employees bring a guest, such as a partner or friend. This is absolutely fine – the £150 allowance applies per attendee (so both the employee and their guest count towards the limit). But there are some important VAT rules to watch out for. 

VAT – What Can You Claim?  • You can claim back the VAT on costs relating to your employees. • BUT – you cannot reclaim VAT on costs relating to non-employees (such as guests), unless you charge those guests to attend the event. Example: If you hold a dinner for 10 employees, each bringing a guest (20 people in total), you can only reclaim VAT on half the total bill – the part relating to your actual employees.  

Key Points to Remember:  • The total cost per head (including employees and their guests) must not exceed £150 to qualify for the exemption. • Only the VAT relating to employees’ costs can be reclaimed. • If you charge guests to attend, you may be able to reclaim the VAT associated with their costs, but you may also need to charge them VAT!  Tip: Keep clear records showing how much of the cost relates to employees and how much to their guests.