You can deduct the cost of your work Christmas Party against tax but there are some rules you have to follow. Sorry to sound like a bit of a scrooge, but if you get it wrong it can work out expensive.
You’re allowed to spend £150 (inc vat) per person. The total cost must include things like taxis, accommodation as well as food and drink. But you can include customers and employees guests when working out the average spend. Be warned, if you spend any more than this the Christmas doo becomes a taxable benefit which means you have to pay income tax and NI on top.
If you’re vat registered you can only claim back the vat incurred by your employees, not their guests. If the guests make a ‘reasonable contribution’ to the cost of the event all the vat can be claimed but you’d naturally have to add this contribution to your books.
P.S. The party has to be open to all employes. So yes, you have to invite the IT guy even if he is a bit boring. Diolch to Bleddyn from Laud Meredith and Co for highlighting this issue for us.