What counts as a social function

[Acme Thunderer]

Its the time of year where a lot of us make use of the tax exemption for social functions, but what does this event have to do/be to qualify as a social function (apart from be open to all employees of the LtdCo)

For example if I and Mrs Thunderer go to London for a day of shopping could this count as a social function? Obviously the shopping itself won't be, but is the rail fare and lunch allowable? To me this doesn't feel right and for the amounts involved isn't worth the hassle.

But what if we go to a matinee performance of a muscial show? Sounds more like a social function now

Anyone had any experience of their social function being disputed for tax purposes?

[northernladuk]

It was described to me as a special event or celebration. Shopping is neither of those. Why are you asking? Is meals not enough?

You only have £150 per head and it can be split over a number of events so can easily be covered by a few meals over the year. No need to go looking at anything fancy and push the envelope.

Put an xmas do through and a meal around birthdays or start of LTD/contract or something and move on. It is hardly worth losing much sleep over.

[Clare@InTouch]

It just has to be staff entertainment, and it has to be an annual function. As NLUK says, a shopping trip would be harder to justify than a meal, and you could do a meal at Christmas as well as a Summer BBQ. As long as the total per head is under £150 then you're fine. 1p over and it's a benefit in kind.

[ChimpMaster]

It just has to be staff entertainment, and it has to be an annual function. As NLUK says, a shopping trip would be harder to justify than a meal, and you could do a meal at Christmas as well as a Summer BBQ. As long as the total per head is under £150 then you're fine. 1p over and it's a benefit in kind.

I'm planning a night with the Mrs at a London hotel with dinner. All in it'll definately be less than £300.

[d000hg]

So if you use your full £300 and are on the typical "take ~£7k salary, top up to higher tax threshold with dividends", what is the actual saving achieved? Simply 20% due to reduced company profits, or is it more complex than this? I always assumed you can't claim back VAT, is that right?

[Clare@InTouch]

So if you use your full £300 and are on the typical "take ~£7k salary, top up to higher tax threshold with dividends", what is the actual saving achieved? Simply 20% due to reduced company profits, or is it more complex than this? I always assumed you can't claim back VAT, is that right?

You can claim back the VAT on the staff portion, assuming you're standard VAT registered, but not on the amount apportioned against guests.

The saving is just CT - £300 x 20% = £60. Not huge, but better in your pocket than the taxmans, surely?

[northernladuk]

You can claim back the VAT on the staff portion, assuming you're standard VAT registered, but not on the amount apportioned against guests.

The saving is just CT - £300 x 20% = £60. Not huge, but better in your pocket than the taxmans, surely?

If you were going to pay for the meal anyway it also doesn't come out of your divi money as well. A very minor amount but again all helps.

Question about the 1p over. If the meal came to £160 on the reciept can you just not claim £150 of it on the company paperwork and swallow the other tenner or does the fact the meal came fo over the £150 mean BIK kicks in regardless of what you actually claim? i.e. is it if the function is over £150 or your claim is over?

[Clare@InTouch]

If you were going to pay for the meal anyway it also doesn't come out of your divi money as well. A very minor amount but again all helps.

Question about the 1p over. If the meal came to £160 on the reciept can you just not claim £150 of it on the company paperwork and swallow the other tenner or does the fact the meal came fo over the £150 mean BIK kicks in regardless of what you actually claim? i.e. is it if the function is over £150 or your claim is over?

You can't use the £150 as part payment, it has to cover the whole bill. What you could do of course is pay for the meal & some drinks up to around £140, pay the bill, then retire to the bar to continue supping red wine from your own funds.

From the HMRC guidance: The £150 is not an allowance to be set against an amount that exceeds that figure.

EIM21691 - Particular benefits: annual parties and other social functions: examples

[d000hg]

Or you could get the restaurant to split the bill in two afterwards, and claim one?

[Waldorf]

You can't use the £150 as part payment, it has to cover the whole bill. What you could do of course is pay for the meal & some drinks up to around £140, pay the bill, then retire to the bar to continue supping red wine from your own funds.

From the HMRC guidance: The £150 is not an allowance to be set against an amount that exceeds that figure.

EIM21691 - Particular benefits: annual parties and other social functions: examples

So Clare, is this advice tax avoidance or tax evasion?