Christmas expenses 2022: what can you claim?

After a year of spiralling prices, it wouldn’t make you a Scrooge to look for smart ways to stay on top of your business’s Christmas costs. We can be your little helpers by highlighting some festive expenses you might be able to claim tax relief on this holiday season.

The Christmas party

Throwing a seasonal shindig is a great way for you and your team to come together at the end of a challenging year. For a lot of businesses this will be the first time in several years that the office party or festive lunch can be face-to-face instead of online. But for others, the celebration will remain virtual - especially with many people now working remotely on a permanent basis. 

Fortunately, in-person and virtual parties are both covered by the same tax exemption: you may be able to claim back the cost of food, entertainment, equipment and other expenses depending on who’s on the invite list and how much you’re spending. In order to qualify for tax relief, the event must:

  • be open to all your employees
  • be an annual event
  • cost £150 or less per person

All the ins and outs of claiming tax relief for parties are available on HMRC’s website. For more on the tax differences between throwing a party for your staff and a party for your customers, take a look at our guide on business entertaining expenses.

Trees, tinsel and trinkets

If you have an office that’s not in your home, you can claim tax relief on Christmas decorations because HMRC will consider the cost of the decorations to be part of your office expenses. Tinsel, trinkets and even a Christmas tree can all be logged in your accounts as day-to-day running costs. 

Unfortunately, if you work from home, you can’t claim any tax relief on festive decorations, as HMRC will most likely view decorations for your home as items for personal enjoyment rather than business purposes.

Gifts for your customers

If you’re feeling generous and want to buy a present for one of your customers, you need to meet these requirements to be able to claim tax relief on the gift:

  • You don’t spend more than £50 per year on gifts for the client in question
  • The gift contains a ‘conspicuous advert’ for your business
  • The gift isn’t food, drink, tobacco or a voucher that the client can exchange for goods or cash

Find out more about these requirements on HMRC’s website.

Gifts for your team

If you have employees, you may want to give them a little something to say thank you for their hard work this year.

If you’d like to give your team members a small, personal gift that doesn’t have a direct cash value, such as a bobble hat or a bunch of flowers, you might be able to claim tax relief on the purchase as a trivial benefit. However, if you choose to give a gift that does have a direct cash value, such as a gift voucher, you will most likely need to report this value to HMRC through payroll as part of your employees’ earnings.

If you choose to reward your staff with a cash bonus, HMRC will view this in the same way as your employees’ regular earnings and you will need to run the amount through your payroll as normal.

Allowable expenses aren’t just for Christmas - check out our guides to find out more about the small business expenses that are allowable for tax relief all year round. If you’re not already using FreeAgent, give yourself the gift of simpler small business expense management in 2023 by taking a 30-day free trial of our award-winning accounting software.

Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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