Company Retreats

Overview 🏖️

It is increasingly common for companies to hold annual retreats, where staff are taken to an exciting location for a mix of team building, workshops, and leisure activities.

HMRC guidance hasn't caught up with the latest working practices and does not directly address retreats, so some aspects fall into a grey area of tax. As such, each case must be considered on its own merits to identify the correct treatment.

The main risks are:

HMRC could decide the retreat is not tax-deductible for the company.
HMRC could treat it as a taxable benefit for employees, who would then pay tax on the value of the benefit.

Both outcomes could be costly, particularly if the retreat is to a luxury or overseas destination.

✅ Tax Position for the Company

The key test is whether the retreat was wholly and exclusively for business purposes.

If the retreat is held to grow, develop, or expand the trade, the costs are generally deductible.
If the trip is purely for leisure, the costs are unlikely to be deductible.
Where expenditure has a dual purpose (business and leisure), the general rule is that the full cost is disallowed. However, if the business element can be clearly identified, that portion may still be deductible.

Example 1 – UK retreat with mixed costs

A digital marketing agency holds a team-building trip in Wales costing £5,000.

£3,000 is for structured workshops and training (tax deductible).
£2,000 is for go-karting (not tax deductible).

Example 2 – Overseas conference

A tech company sends staff to LA for a software conference.

Employees attending only the conference: costs deductible.
Employees combining the trip with sightseeing: travel costs not deductible for the company.

🔗 HMRC guidance: Employee training

📊 Tax Position for Employees

Some retreat costs may be treated as taxable benefits for employees. It is important to assess each element.

Work-Related Training

Exempt where activities are designed to improve knowledge, skills, or personal qualities relevant to the role.
Not exempt if the main purpose is entertainment, reward, or inducement.

💡 Example:

Qualifying: Safe-driver training for company car users.
Non-qualifying: An evening at a go-kart track.

🔗 HMRC guidance: Work-related training

Team Building Activities

There is no specific HMRC guidance, but structured programmes (for example Outward Bound) may qualify as exempt. Recreational activities with no link to skills or knowledge (like go-karting) are unlikely to qualify.

Dinner and Drinks

Normal meals, refreshments, and leisure provided within a training course are not taxable. Other entertainment follows the normal rules for staff entertaining.

🔗 HMRC guidance: Meals, refreshments and leisure within training

Travel Costs

If the main purpose of the retreat is work-related training:

Travel and subsistence costs are not taxable.
Companies may also cover additional childcare costs made necessary by the training.

Other Incidental Costs

HMRC allows some flexibility:

Enjoyable or recreational aspects within genuine training (e.g. hotel leisure facilities) usually do not require apportionment.
Mixed-purpose expenditure (part reward, part training) may require splitting.

🔍 Key Takeaway

Company retreats are rarely clear-cut. They usually involve a mixture of allowable and disallowable costs, with some elements also taxable for employees. HMRC’s rules have not yet caught up with how modern companies use retreats.

💡 To avoid unexpected tax costs, seek advice in advance and carefully assess each element of the trip.