The Taxman allows a business to spend up to £150 (including VAT) per employee on an annual Christmas party withoutemployees being taxed on it! If spouses attend, the Taxman says they can alsohave a £150 allowance. However, there are a few things to watch out for if youwant to maximise the benefit of this allowance:

1. The £150 per employee covers not just the Christmas party but also anytransport and accommodation costs. So, if the budget allows and you are feelinggenerous you could also provide your employees with an overnight stay! I wonderhow many of you will do that!
   
2. If the cost per employee is just 1p over the limit, thenunfortunately the whole cost becomes a taxable benefit on the employee. Shucks!However, if the employee suffers the excess over £150, then that is OK!
   
3. This allowance isn’t just applicable to Christmas parties,it also applies to any event open to all staff throughout the year! Therefore,you can have a Christmas party, a summer BBQ party, etcand as long as the total cost doesn’t exceed £150/employee for the year thenthe benefit is tax-free. I’ll drink to that!
   
4. The exemption doesn’t just apply to companies with lotsof employees. In theory even a one man company can have a function for himselfand his spouse because the event would be open to all employees.
   
5. You can only recover the VAT onthe element relating to your employees. Therefore, you cannot recover VAT on spouses’ element of the cost.