A staff party or an annual function qualifies as a tax-free benefit for your employees providing that you meet the following conditions:

• The total cost must not exceed £150 per head, per year.
• £150 includes VAT together with any extra costs such as transport and accommodation.
• The £150 is a limit and not an allowance: if the cost is £151, the whole benefit is taxable.
• The event must be primarily for entertaining staff.
• The event must be open to all staff (in that location, if you have several branches or departments).
• The event is not just to be for directors, unless all your staff are directors.
• The cost of the whole event is an allowable expense for your business.
• You can claim back input VAT but this may be restricted where you are also entertaining customers.