We know that our dental clients like a party, as do we, but do you know the staff expenses tax implications of entertaining and Christmas bonuses?

An annual Christmas party, or a meal and drinks out with your staff is enough to trigger a tax charge if the limits are not followed appropriately, as detailed below:


Staff entertainment

Staff entertainment is generally allowable for tax purposes provided that it is not merely incidental to client entertainment.

The sticking point here is that it may be considered to be a benefit-in-kind on which your employees will have to pay some tax. There are many exceptions to this such as where staff attend an annual event (e.g. Christmas party) where the cost is less than £150 per head or where the benefit can be considered “trivial”. The limit of £150 per head applies to all combined annual events, so if you have more than one annual event, there is only £150 limit as a collective not separately per event. The rules can be tricky to navigate and, if you get it wrong, it can be very costly in back-taxes, interest and penalties.

What does trivial mean?

  • it cost you £50 or less to provide
  • it isn’t cash or a cash voucher
  • it isn’t a reward for their work or performance
  • it isn’t in the terms of their contract

Whilst we are all up for as many good times as possible, you must bear in mind…

Promotional events – events that publicise a business are not considered to be entertainment. However, care needs to be taken with the cost of food and drink provided at such events. Unless it is immaterial, it will be considered client entertaining and so not tax-deductible.

Friday night drinks – most staff have enjoyed after-work drinks at some point or another. However, if the business picks up the tab, then this does create a benefit-in-kind for those individuals – a kind gesture that can leave a sour taste.

Christmas bonuses

Many of our dental clients are kind enough to reward their employees with a Christmas bonus for their hard work, which again unfortunately comes with a big BUT…

Any bonuses paid to employees, Christmas or not, count as earnings, so to account for this you must:

  • add it to your employee’s other earnings
  • deduct and pay Pay As You Earn (PAYE) tax and Class 1 National Insurance through payroll


If you are in doubt or have any queries that could bear tax implications, please do get in touch with our healthcare team so we can guide you.

If you would like to understand more about the tax implications on festive gifting, please do contact Zach Wall, healthcare senior at: zwall@robson-laidler.co.u