The Best Guide for the CM8 Area

Entertaining Clients? - Cloud Bookkeeping, Chelmsford

Published: 8th December 2014 12:07

Treating your clients and staff may feel like an essential part of your business, unfortunately in the eyes of the HMRC it's not so straightforward. It can build relationships with clients, introduce you to new clients and reward staff for their hard work, but it is important to realise there are specific rules with regards to entertaining and taxes.

Broadly speaking, the following hospitalities are entertainment:

• Food and drink
• Use of your business assets
• Accommodation
• Business gifts
• Tickets to an event, e.g. a concert, theatre, sporting event

You need to establish whom are you entertaining; employees or non-employees. Remember, if you are a sole trader or partner in a partnership or LLP then you are not an employee, and any entertaining costs are not allowed for VAT or tax.

VAT on entertaining is only recoverable when you entertain employees. If you hold an event where there is a mixture of employees and clients then the VAT is only recoverable on the employee element of the cost.

Generally, all entertaining is disallowed for income or corporation tax purposes, but there is an exception for employee entertaining, provided that;

• It is open to all staff to attend
• The cost is less than £150 per head per year 

If these conditions are not met, the tax relief would not be given and could end up costin your employees, as this would be seen as a taxable benefit.

Entertaining, is a grey area, if you are in any doubt about which expenses to claim against VAT and tax, seek advice from an accountant. 

Thank you to Emma Pickles, from EmmaPicklesAccountants, for her insight to entertaining. 

Yours Saskia, Cloud Bookkeeping Chelmsford 

 

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