Most businesses who throw their staff a Christmas party, will have had the disappointment, and the financial hit, of having to cancel not one, but two Christmas parties, since the outbreak of Covid 19.
This December, many employers and employees have been excitedly preparing for their first proper Christmas party in three years. Sadly, for many, particularly those who had parties planned next week, disappointment ‘strikes’ again, following the train strikes which are planned throughout December, generally affecting those (in relation to work Christmas parties) whose only means of travelling to their area of work, is by train. At Gravita, we have spoken to many clients and contacts across London, who face another cancelled party and we are grateful that we planned ours a little earlier in the month. The announcement of train strikes, for many, came after cancellation policy deadlines had passed for their Christmas parties, so deposits have been lost, and once again, businesses (and of course the hospitality sector for having empty venues) are out of pocket.
When planning our own events schedule here at Gravita, when we look round a venue, the discussion around deposits has now moved up to question number one on our events check list; recent years have made us a little more nervous. A deposit, or advance payment, is a proportion of the agreed price of the good or service you are buying, so in this case, the cost of the venue, catering and so on, and therefore in this example, a substantial amount. HMRC announced that from 1st March 2019, VAT continues to be applicable on deposits, which is certainly helpful to the hospitality sector, an industry which encounters a huge amount of no shows and cancellations.
When planning your Christmas party, or any other event throughout the year, do remember to make room for VAT on the deposit within your budgeting process. As with any deposit, there is a point at which the cancellation policy states that the deposit is non-refundable, and you will therefore also need to bear in mind the unfortunate reality, that if your event is cancelled for reasons out of your control, and after the point at which the deposit is fully (or even partly) refundable, you will lose not just your deposit, but potentially the VAT paid on that amount. If, however, you decide to cancel the goods or service for which you have paid a deposit and within the deadline that the deposit is fully refundable, you should automatically receive the VAT back, along with the payment.
What next?
If you have any questions, please speak to Sandy Cochrane, VAT Partner, who will be able to help.
