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Or, Entertainment Expenditure – Can You Reclaim The VAT?

Businesses can claim input tax on their expenditure, assuming that they are VAT registered. However, a specific tax block applies to some entertainment expenses.

 

Client Entertaining

No VAT can be reclaimed on client entertaining expenditure, for example meals out, or drinks with clients.

 

Employee Entertaining

It needs to be considered whether the employee is ‘acting as host’ to a client, in which case you cannot reclaim the VAT. However, if the meal cost for the employee is being incurred because he is away from the office on a business related job, then VAT can be claimed because the expense is classed as ‘subsistence’ rather than ‘entertainment’. HMRC do however require that the expense is ‘reasonable in scale and character.’

 

Business owner/directors 

As with Employee Entertaining, input tax can be claimed on lunches for the business owner as long as they are classed as ‘subsistence’.  

 

What about the staff Christmas party?

The festive season is approaching, and the good news is that there is no problem reclaiming VAT if an employer pays for employee meals or other staff entertaining costs – so long as the entertainment is available to all staff in the business, such as the cost of the office Christmas party.

However, if just the directors or partners dined at local restaurants, this would not be eligible, as it was not made available to all staff.

 For more information, check out the relevant VAT note here.

And, if you’re in any doubt, you can always ask contact us here.