If you’re planning a staff social, strategy day or Christmas party, you might be wondering:
Can I put a team building event through the business as a cost?
It’s a common question, and the answer is yes but only if it’s structured correctly.
Understanding whether a team building event is a business cost depends on who attends, how much it costs and whether it meets HMRC’s staff entertainment rules.
At Infinity Accounting, we regularly help businesses review staff entertainment plans to ensure they remain tax efficient and compliant.
Is a Team Building Event a Business Cost?
A team building event can qualify as a business cost, but it falls under specific HMRC rules around entertainment.
The key distinction is between:
- Business entertaining
- Employee entertaining
The tax treatment is very different.
Business Entertaining vs Employee Entertaining: What’s the Difference?
Business Entertaining
Business entertaining relates to hospitality provided to non-employees, including:
- Clients
- Customers
- Suppliers
- Business contacts
- Sole traders themselves
HMRC defines business entertaining as providing “hospitality of any kind,” which includes:
- Food and drink
- Accommodation
- Event tickets
- Sporting events
- Use of business assets
HMRC guidance:
https://www.gov.uk/expenses-and-benefits-business-travel-mileage
Is business entertaining tax deductible?
No.
You cannot claim Corporation Tax relief on business entertaining for non-employees, and VAT cannot be reclaimed either.
If your team building event includes clients, that portion of the cost will not be allowable.
Employee Entertaining
Employee entertaining applies when the event is for employees who are on payroll and receiving a salary. This includes salaried company directors.
Employee entertainment may include:
- Food and drink
- Venue hire
- Activities
- Transport
- Overnight accommodation
Is employee entertainment tax deductible?
Yes, in most cases.
Employee entertaining is generally treated as an allowable business expense for Corporation Tax. VAT-registered businesses may also reclaim VAT on qualifying staff entertainment.
HMRC guidance on staff events:
https://www.gov.uk/expenses-and-benefits-social-functions-parties
What Is the £150 Annual Staff Party Exemption?
HMRC allows businesses to claim tax relief on annual staff events including a team building event if all of the following apply:
- The event is open to all staff
- It is an annual event
- The cost is £150 or less per person (including VAT)
If these conditions are met, the event:
- Is an allowable business cost
- Is not treated as a taxable benefit for employees
If the cost exceeds £150 per person even by £1 the entire amount becomes a taxable benefit.
The £150 limit applies per head attending, including guests.
Can You Claim a Team Building Event as a Business Expense If Guests Attend?
If employees bring guests, the cost per head must include those guests.
If clients or other non-employees attend, you must apportion the cost:
- The employee portion may qualify
- The non-employee portion will not
If you’re a sole trader, you are not classed as an employee. Therefore, entertaining yourself does not qualify as employee entertaining.
Mixed events are where many businesses make mistakes, so it’s important to calculate this carefully.
When Does a Team Building Event Become a Taxable Benefit?
A team building event may become a taxable benefit if:
- It is not open to all staff
- It is not an annual event
- The cost exceeds £150 per person
In these cases, the benefit may need to be reported on a P11D.
HMRC P11D guidance:
https://www.gov.uk/paye-forms-p11d
Incorrect reporting can result in:
- Additional tax
- National Insurance charges
- Penalties
How to Claim a Team Building Event as a Business Cost Correctly
To ensure your team building event qualifies as a legitimate business cost:
- Keep detailed records of attendees
- Calculate the cost per head including VAT
- Separate employee and non-employee costs
- Confirm it meets the annual event criteria
- Retain invoices and supporting documentation
If you’re unsure, it’s always better to check before booking.
You can learn more about our business accounting and tax compliance services here:
https://infinity-accounting.co.uk/services/
Or speak directly to our team for tailored advice:
https://infinity-accounting.co.uk/contact/
FAQ: Team Building Event Business Cost
Can a sole trader claim a team building event?
Generally no, as sole traders are not classed as employees.
Is a Christmas party tax deductible?
Yes, if it meets the £150 annual exemption rules.
What happens if the cost exceeds £150 per person?
The entire amount becomes a taxable benefit, not just the excess.
Can I include clients in a staff event and still claim it?
Only the employee portion may qualify. The client portion is business entertaining and not tax deductible.
A properly structured team building event can absolutely qualify as a business cost. The key is understanding the rules before committing.
With the right planning, you can reward your team, strengthen morale and remain fully compliant with HMRC.
If you’d like clarity on your plans before booking, Infinity Accounting is here to help
