Recovering VAT on business entertainment expenditure is not possible. This includes the gratuitous provision to customers or clients of hotel accommodation, food, and drink, or tickets to events.
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. Those workers who are not part of the company cannot reclaim input tax on the subsistence of the contract.
Conversely, where a business organises an event which the directors and employees attend as acting hosts, the whole of the VAT on the cost is irrecoverable. None of the cost attributes 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 costs 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 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.