VAT – Entertaining Expenses

VAT – Entertaining Expenses

VAT on Entertaining Expenses can not be recovered.
In this article, we have discussed VAT on entertaining expenses that are incurred by the business organization when the business held a party or other such activity for their employees.
This involves the provision of hotel rooms, food, and drink or event passes to customers or clients for 
free.

If a director or employee entertains a customer or client whilst away from the workplace location.  The VAT on that part of the entertainment expenditure which relates to the director’s or employee’s own meal cost may be recoverable as subsistence rather than business entertainment. Subsistence expenditure can also include, for example, the cost of staying in a hotel when attending a client meeting. Input VAT under such circumstances would be deductible. The input tax on the subsistence of contract workers who are not employed by the company cannot be reclaimed.

Conversely, where a business organizes an event that is also attended by directors and employees acting as hosts, the whole of the VAT on Entertaining Expenses is irrecoverable. None of the costs may be attributed to staff subsistence.

Staff entertaining such as staff parties, team-building exercises, staff outings, and similar events, qualifies for input VAT recovery. This can include the entertainment expense relating to directors, partners or sole proprietors of a business where they attend staff parties together with other employees but excludes entertainment expenditure where the event is organized solely for the business proprietors.

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If you need any assistance in determining if any entertaining expense can have the VAT reclaimed please contact us.

 

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