If you are treating your staff to a Christmas party you should be aware of what is allowable and what is not according to HMRC.
VAT can be claimed on staff entertaining which would include parties, outings or team building events if they are for a business purpose. A business purpose would be to reward staff for good work or to improve morale.
VAT cannot be claimed if entertainment is provided only to directors, partners or sole traders as the entertainment is not provided for a business purpose. HMRC does not consider that directors, partners or sole traders need to reward or motivate themselves.
VAT can be claimed for directors, partners and sole traders if they are attending the event with their staff.
If staff bring a partner or guest to a company party and the cost is covered by the business only the VAT on the staff element of the cost can be claimed and not the VAT on the cost of the whole event.
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