Staff Entertainment
If you're a business owner planning your next team event, understanding the staff entertainment expenses exemption could save you money and help you stay compliant with HMRC rules.
But here's the thing: this exemption isn't a cash benefit for employees. It's a tax and National Insurance exemption for specific entertainment costs your business incurs—and there are strict conditions attached.
Let's break down exactly what qualifies, what doesn't, and how to make the most of this allowance.
What IS covered by the exemption?
The staff entertainment exemption applies to annual events that are open to all staff, such as:
Christmas parties or festive celebrations
Summer barbecues or team outings
Annual team-building events
Other social functions for employees
The Three Golden Rules
For your event to qualify for the exemption, it must tick all these boxes:
1. It must be an Annual Event
One-off or irregular gatherings don't count. The event needs to be part of a regular annual schedule.
2. It must be open to all employees
You can't just invite senior management or a select group. The event must be available to all staff (or all staff at a particular location if you have multiple sites).
3. It must not exceed £150 per person per year
This is the total cost including VAT, food, drink, venue hire, transport, and accommodation if applicable. If you host multiple events in a tax year, the combined cost per person must stay within this limit.
What IS NOT covered?
It's equally important to know what falls outside this exemption:
Cash bonuses or vouchers – These are treated as taxable benefits
Client entertainment – Expenses for wining and dining clients or suppliers don't qualify
Casual staff lunches or drinks – Unless they're part of a qualifying annual event, they're not covered
Exclusive events – Functions limited to directors or selected employees won't qualify unless all staff are invited
The £150 Threshold: A Word of Warning
Here's a crucial point many businesses miss: if your total annual entertainment costs exceed £150 per person, the entire amount becomes taxable—not just the excess.
For example, if you spend £160 per person, you can't claim exemption on the first £150. The full £160 becomes a taxable benefit, subject to tax and National Insurance.
Making the Most of Your Staff Events
To ensure you're maximising this exemption while staying compliant:
✓ Keep detailed records of all event costs and attendee numbers
✓ Calculate the per-person cost accurately, including all associated expenses
✓ Plan ahead if hosting multiple events to stay within the annual limit
✓ Ensure inclusivity by making events genuinely accessible to all staff
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