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"Staff" party - one director and his family

Bill is under £150 per head - allowable for CT? BIK?

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Good morning

Sole director is planning to hold his Christmas annual party with 3 other members of his family (also shareholders). The cost will be under £150 per person.

Provided this is an annual event I understand a staff party for the sole director would be allowable for tax but here would a BIK arise? I can't find whether there is a limit on number of guests per staff.

Could it be argued that it is not W+E for the business and disallowed for tax?

Thanks

Replies (22)

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By Duggimon
15th Dec 2017 12:30

The cost would have to be under £150 per staff member, not per attendee, ie under £150 in total.

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Replying to Duggimon:
Portia profile image
By Portia Nina Levin
15th Dec 2017 12:36

Where did that come from? It isn't what the legislation says.

I think the exemption fails completely or it only protects the director, and there is a disallowance.

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Replying to Portia Nina Levin:
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By Chipette
15th Dec 2017 12:44

Thanks, I assume if it was just the director and his wife this would be allowed (i.e entertaining others is not incidental).

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Replying to Chipette:
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By Portia Nina Levin
15th Dec 2017 12:49

I would expect full exemption and CT deduction for just a director and spouse "annual function", yes.

Thanks (2)
Replying to Duggimon:
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By Chipette
15th Dec 2017 12:39

I always thought the limit was per head - i.e you divide the whole cost by the number of attendees (staff and guests).

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Replying to Chipette:
By Ruddles
15th Dec 2017 15:48

Correct - which is why the advice to employers is: if your cost per head is marginally over £150 per head, invite in a tramp off the street and give him a drink and a piece of cake.

Thanks (2)
Portia profile image
By Portia Nina Levin
15th Dec 2017 12:47

The exemption applies if it is an annual function for the employer's employees. The employee is outnumbered by non-employees 3 to 1, so arguably the exemption fails completely. = BIK for director on whole amount, but CT deductible.

For the same reason, there is an argument that it is business entertaining. = Not CT deductible, but no BIK for director.

Or the exemption succeeds in relation to the director, but the shareholders "benefit" is taxable under CTA 2010, s 1064 (no exemption), with a corresponding disallowance under CTA 2009, s 1305.

Thanks (3)
Replying to Portia Nina Levin:
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By Chipette
15th Dec 2017 14:28

Thanks PNL.
Say the cost per person is under £50 then I guess the others can be exempted (trivial benefit)?

At least I can give options to my client as to how much they can spend.

Edit: or may be not exempt after all as over £50 in one go...

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Replying to Chipette:
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By WhichTyler
15th Dec 2017 15:26

And the trivial benefit only applies to employees...

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Replying to WhichTyler:
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By Chipette
15th Dec 2017 15:37

Yes, I was thinking 4 x £50 BIK for the director and his family could be exempted under the trivial benefits rule but £200 doesn't work...

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Replying to Chipette:
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By Tax Dragon
15th Dec 2017 15:40

Are fees > tax yet?

Thanks (3)
By itp3asso
18th Dec 2017 15:41

Doesn t say much for the orofitability of the business if Directors are worrying about deduction entitlement for 60p.0 quid !

I d dump this dude .
Sounds like " cash flow " issues diwn the line meaning you risk acquiring a
midnight flipoer.

Thanks (0)
By itp3asso
18th Dec 2017 15:41

Doesn t say much for the orofitability of the business if Directors are worrying about deduction entitlement for 60p.0 quid !

I d dump this dude .
Sounds like " cash flow " issues diwn the line meaning you risk acquiring a
midnight flipoer.

Thanks (0)
By itp3asso
18th Dec 2017 15:42

Doesn t say much for the profitability of the business if Directors are worrying about deduction entitlement for 600 quid !

I d dump this dude .
Sounds like " cash flow " issues diwn the line meaning you risk

acquiring a
midnight flipper

Thanks (0)
Replying to itp3asso:
By cfield
18th Dec 2017 15:57

Is this a version of that old joke "I say I say I say"?

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By cfield
18th Dec 2017 15:55

Just tell your client to keep the receipts, pay for it himself and put £150 on his next expense claim. He can claim the VAT back on his share of the bill too.

Last time I looked at this, even the company secretary didn't qualify for the exemption, not being on the payroll, so might be an idea for your client to employ his wife for a week on a zero hours contract with the task of organising the firm's Christmas party. Pay her £157 and make her pay the rest of the bill with it.

That kills 3 birds with 1 stone as a) he'll have evidence of an organised annual event, b) an extra £150 to claim on expenses, and c) a 6.075% tax saving on the £157 (or even 26.325%) as he can reduce his dividends by £157 x 81%.

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Replying to cfield:
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By Portia Nina Levin
20th Dec 2017 11:13

This is Jane Horrocks.

The exemption only applies to provision of an annual function. Not reimbursement of an individual's own costs on their [implicitly privateley organised] own function.

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Replying to Portia Nina Levin:
By cfield
20th Dec 2017 12:20

But it's not privately organised, implicitly or otherwise. It's an official company annual event. Someone has to organise it. If not the directors or employees, then who?

Plenty of directors pay for meals and drinks at the annual bash out of their own pocket and then claim on expenses. Why not a sole director arranging a party for himself?

The key point is that it must be a company event. If the restaurant is booked in the name of the company (an email with company details on will do) and the bill is made out to the company (just pay a deposit and ask for a receipt by email) then this is beyond dispute.

Once it is accepted as an annual event, then it doesn't matter whose card or cash is used to pay for the event, any more than paying for a hotel or lunch on a business trip out of your own pocket negates it being a business expense.

Is Jane Horrocks your real name by the way? We all know it's not Portia.

Thanks (1)
Replying to cfield:
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By Portia Nina Levin
20th Dec 2017 13:05

If it were only staff and their partners attending, then I'd agree with you, but the staff are outnumbered 3 to 1 in this instance, so it still isn't for employees of the employer. It has all the trappings of a private function, to which the company are just contributing £150 (which then makes it taxable, in my opinion, as pay).

And the fact that ony £150 is reimbursed does not prevent it being expenditure on business entertaining either.

I think your suggestion manages to both fail the test of the exemption, and secure a disallowance of the expenditure for the employer.

Thanks (2)
Replying to Portia Nina Levin:
By cfield
20th Dec 2017 13:27

As I suggested, he can always make his wife an employee for a week and then it would be equal numbers.

I take your point about the main purpose of the event and it could well trip up many claims, but annual events for sole directors have been accepted by HMRC for many years (whether that's due to unofficial policy or failure to challenge them is a moot point) so I don't think my advice is ineffective. It's not the procedure by which he pays for the party that's at issue here. It's whether he can treat it as an annual event at all.

I guess he could always ask for separate bills - one for him and the other for the rest of his family.

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Replying to cfield:
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By Portia Nina Levin
20th Dec 2017 15:09

Whether or not there are separate bills, they have either all been to the same event, or some went to one event and others went to other events, as a matter of fact.

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By pauljohnston
20th Dec 2017 10:51

He could employee his wife at £100 per month through out the year. Statutory Minimum wage rates dont apply to family. He could also give her trival benefits during the year, subject to the associated persons restrictions.

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