Staff entertainment allowance of £125+ p.a.

Staff entertainment allowance of £125+ p.a.

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We currently have an allowance of £125+vat per year per employee for staff entertainment.

If that allowance is exceeded by £20 per employee over the year (over two social events, a summer and winter party).  The rules dictate that this excess should be noted on each employees P11d for the tax year?

How strictly is this enforced and is it realistic to expect a £20 BIK to be recorded on someones P11d?

Replies (19)

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paddle steamer
By DJKL
16th Oct 2015 12:10

I thought the limit was £150

I thought the limit was £150 these days?

https://www.gov.uk/expenses-benefits-social-functions-parties/overview

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By claudialowe
16th Oct 2015 12:13

It is.....

The OP says £125+VAT - £125.00 + VAT = £150.00 :-)

 

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Replying to Wilson Philips:
paddle steamer
By DJKL
16th Oct 2015 12:22

I must read the question

claudialowe wrote:

The OP says £125+VAT - £125.00 + VAT = £150.00 :-)

 

I must read the question

I must read the question

I must read the question

i must read the question

 

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By hje
16th Oct 2015 12:14

'Tis £150.00

and "it is not an allowance" http://www.hmrc.gov.uk/manuals/eimanual/eim21690.htm

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Replying to User deleted:
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By 101Accounts
16th Oct 2015 13:38

Need to reduce the Winter Party budget

hje wrote:

and "it is not an allowance" http://www.hmrc.gov.uk/manuals/eimanual/eim21690.htm

 

Cheers 'hje', I did actually read that but totally got he wrong classification for my post...must get another coffee.

And thanks all for the responses, so the second event would be taxed in full, and better for the company to meet the tax commitments.

I will just have a word with my boss and tell him that the 'winter party' now needs to be capped to £65 per head including travel, food, drink and the event to keep us under the £150 inc VAT threshold!

 

 

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By young ronaldo
16th Oct 2015 12:20

It is my understanding

that if you spend £170 then the whole lot should go on the P11D and not just the excess

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By Marion Hayes
16th Oct 2015 12:23

Error

I see that £125 + vat of 20% is £150. Safer to look at total as benefits are usually based on cost to you, not net cost after VAT reclaim.

Also, it is not the £20 which is taxable - it is the whole of the cost per head for the event which takes you over the threshold. That means if one event is £80 per head and the other £70 you should declare a benefit of £70 per head. It is only reportable for P11d employees.

Whilst there was always a de minimis of £25 for P9d's I am not aware of any such item for P11d's so if it is not declared I believe it will be strictly enforced within the enquiry which discovers it.

A simpler outcome would be an employers agreement with HMRC to meet the tax costs of the benefit. Much better not to have to tell employees we are good aren't we putting on events for you, but by the way, you will be paying tax on it!!

 

 

 

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Replying to jcace:
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By chatman
22nd Oct 2015 10:53

Cost to you v Cost after VAT reclaim

Marion Hayes wrote:
Safer to look at total as benefits are usually based on cost to you, not net cost after VAT reclaim.

Marion - Isn't the cost to you the cost after the VAT reclaim, i.e aren't they the same thing?

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By claudialowe
16th Oct 2015 12:30

Don't beat yourself up DJKL, it is Friday after all!

 

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By Sherriffnatasha
21st Oct 2015 17:37

Is this the same for charities who don't pay tax?

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By SHCTax
22nd Oct 2015 10:36

Charities may not pay tax on their own profits but they do administer (and pay) Employment Taxes for their employees. As this is in respect of the latter, it would apply to Charities in the same way as any other business.

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By James_Whitelegg
22nd Oct 2015 10:39

Otherwise PSA the way to go

We are in the same situation - after an HMRC audit (8 years ago) we now carry out a PAYE Settlement Agreement every year.  Takes about an hour a year, and we have the nice warm glow of paying the correct amount of tax (and no penalties).

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By ruthp
22nd Oct 2015 11:04

PSA for entertainment for sure

Hi

Definitely put a PSA in place for staff entertainment, and leave the P11D for actual benefits eg. private medical.

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By James26
22nd Oct 2015 11:45

Don't forget when calculating the cost per head you are not dividing the costs by total employees in the business, but by the total number of people who attend the event (including non-emloyees). 

Often people get the attendance figure for employees only and don't remember to keep the non-employees in the denominator, if you are in that happy circumstance that will immediately bring the cost per head you've calculated.  If you have already done that and are still tight on the limits and expecting to go slightly over you could introduce a small charge to either spouses or team members.

This could be dressed up you contribute to the annual party cost £5 per head and the company will make a donation to XYZ foundation/charity of at least double this (I don't think you'd want to make too direct a connection with the amount of the donation and the amount received).  The cost of doing this to the company would be less than making up the tax through a PSA on a £70 where that £70 had brought you upto £155 in total (in all but the most obscure circumstances). 

Of course no doubt the tabloids will splash you on the front page for outrageous tax avoidance lol.

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By Mr_awol
22nd Oct 2015 13:14

Including non employees

But don't forget to add the VAT back in (on their part of it anyway) or, if customers, then all the VAT

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By Sherriffnatasha
22nd Oct 2015 21:41

What if there are other events throughout the year - say a birthday dinner for someone and the company pays for drinks?  Does that come out of entertainment allowance?

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Replying to Glennzy:
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By SHCTax
23rd Oct 2015 11:01

Exemption, not allowance

Sherriffnatasha wrote:

What if there are other events throughout the year - say a birthday dinner for someone and the company pays for drinks?  Does that come out of entertainment allowance?

The exemption (it isn't an allowance, as hje mentioned above) is for annual events. If the entertaining is not an annual event (like Christmas Parties or a Summer Barbeque or whatever - something you intend to do each year) then you don't get any exemption at all. Obviously birthdays are annual but if you only go out for a 'landmark' birthday (decades, 21, 18 etc.) then it isn't an annual event.

Marion Hayes wrote:

As far as I am aware you are quantifying benefit received and employee wouldn't have got vat back.

I think benefits legislation specifies vat inclusive

HMRC have a long established practice of using the VAT inclusive cost (and insisting everyone else does the same). I don't think it is actually in the legislation but you'd have a very hard battle convincing them otherwise. No one's ever gone to court to prove them wrong because it's never worth it. I think you'd probably have a good chance seeing as the legislation specifies 'cost to the company' but I guess we'll never know.

 

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By Sherriffnatasha
22nd Oct 2015 21:46

I meant to say - and do you have to pay tax on it?

 

 

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By Marion Hayes
23rd Oct 2015 10:47

@chatman

As far as I am aware you are quantifying benefit received and employee wouldn't have got vat back.

I think benefits legislation specifies vat inclusive

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