Summertime fun in the sun – but will the taxman cause the clouds to come?

I’m sure that all of us look forward to the summer weeks, evenings on the patio, Pimms or gins and BBQs, well that’s if the British weather plays ball!!  So far this year it’s been heatwave one day and record rainfalls the next, no wonder so many of us decide to go abroad for a well-earned holiday. 

On that point, if there is a temptation to mix business with pleasure on a trip abroad during the summer be careful.  HMRC’s house rule of “wholly and exclusively” for business purposes applies wherever you go in the world and in the case of foreign travel the Revenue Inspectors will be more diligent than Border Control!  With HMRC’s concept of “duality” any suspicion of a personal benefit could render the whole of the foreign travel inadmissible! Any travel that is of a personal nature, whether that’s a partner joining the trip or taking in an after conference break, has to be booked totally separately so that the business cost comes from the business and the rest from a personal bank account.  That would also include homebound flights!

But staying closer to home, the work summer do is now becoming almost as much of an event as the Christmas party but what can be claimed for and what not?  Well, the good news is that any staff party or function qualifies as a tax-free benefit for the employees providing you meet the following conditions:

  • The total cost of such functions must not exceed £150 per head per year.  This includes the VAT and any extra costs such as travel and accommodation.
  • This is a limit and not an allowance so if the amount is exceeded even by £1 the whole benefit becomes taxable.
  • The event must be primarily used for entertaining staff and not just directors and it must be open to all staff (in that location if you have several branches or offices).
  • Input VAT can be reclaimed but this may be restricted if customers are also entertained at the same time.

So, it is a bit of sunshine and showers but done correctly there’s no reason why a summer party can’t be enjoyed or a trip abroad for work providing an opportunity for some personal time away.  However, to ensure umbrellas are not needed, make sure the rules are kept to otherwise it will be torrential HMRC rain showers!