As the weather warms, and summer nears, we mark the halfway point of 2023. To celebrate this checkpoint, many small businesses will reward their hard-working staff by hosting a company event.
Be it a barbecue, boat cruise, or brunch, hosting a summer event is a great way to show your appreciation while also giving employees the opportunity to bond and socialize with each other.
That being said, you don’t want to break the bank in the name of promoting company morale.
You may already be aware that the CRA dictates you can only claim 50% of your meals and entertainment expense. But did you know that when it comes to office parties and events, you can claim 100% of the expense on up to 6 events per year? That’s right! Just remember to invite all the employees from a particular location - this is just one of the rules given by the CRA. For the most up to date and complete information, check out the CRA's online resources here:
In this article, we will go over a few of the guidelines and rules for writing off your company events.
1. What expenses are considered meals and entertainment?
Meals and entertainment expenses are usually defined as those that are for pleasure, relaxation and recreation, while being related to business activities (like taking a client or vendor out, treating an employee, or promoting your business to a potential customer).
This includes things like a sports game ticket, a night out at the theatre, or eating out at a restaurant. Within these events, you would incur taxes and gratuities which can be included in the total expense.
What’s not considered meals and entertainment?
You can’t claim expenses like groceries, transportation (public transit, Uber/Lyft, taxi or car), insurance, etc. as meals and entertainment.
Bear in mind that there are no hard and fast rules when it comes to meals and entertainment, in the eyes of the CRA. There is a lot of grey area - so be sure to ask your bookkeeper or accountant if your expense is claimable.
2. Is it a taxable benefit to the employee?
Come tax time, the CRA wants to know about all the perks your employee gets. Cell phones, gas money, parking reimbursements - it's best not to leave anything out. So will your event be considered a taxable benefit to your employee?
There are some definitive rules here - if the cost per person is less than $150 (excluding transport and accommodation), it is not taxable. Because of the pandemic, there are new rules regarding virtual events so be sure to check the CRA’s page for more information.
The social event is also considered a taxable benefit if you’re already outside the 6 event limit for the year. You’ll have to consider the cost of any spouses attending too - their cost is included in the taxable benefit.
If the benefit is taxable, you’ll have to withhold payroll deductions and report the amounts on the employee’s T4 payroll slip the following February.
3. Can I recoup the GST/HST?
Yes! You can claim 100% of the GST/HST paid on your meals and entertainment expense, provided you’ve invited all of your employees, you’re within the 6 event limit for the year, and of course, it is directly related to your business.
We recommend always proceeding with caution when claiming the GST/HST on meals and entertainment - especially when non-taxable items like tips, cash rounding, and surcharges that are not eligible for ITCs are so prominent in this type of expense.
Ready to plan your event?
So now that you’ve got an idea of the bookkeeping side of company events, you can start party planning!
If you’ve got more questions on meals and entertainment expenses and company events, please contact us. We would love to help clear it up - so you can reward yourself and your employees with a little fun!