The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
This guidance note contains some relevant case law that could assist a business with determining the correct VAT treatment of business and staff entertaining expenses.
See also the Business and staff entertainment guidance note.
A company that produced and marketed Scotch whisky reclaimed input tax relating to premises which were primarily used for business administration but were partly used as a venue for business entertainment. HMRC issued an assessment to recover the input tax on the basis that, as the premises were partly used for business entertainment, none of the tax was deductible under the Input Tax Order, Article 5(1). The tribunal rejected this contention and allowed the company's appeal, on the evidence that 70% of the input tax was deductible.
BMW imports and distributes motorcars and motorcycles. It sold these vehicles to independent dealers, who in turn sold them to members of the public. In the course of its promotional activities it arranged 'track days', at which dealers and potential customers could test-drive its cars. Dealers were required to make payments ranging from £25 to £85 per person attending. BMW also arranged golfing days and curling days, and reclaimed input tax on the total costs of these activities.
HMRC issued assessments on the basis that BMW could only recover the proportion of the input tax which equated to the proportion of the costs which was reimbursed by the dealers (ie 29% of the input tax on the 'track days', and 17% of the input tax on the 'curling days'), but that the remainder of the input tax was not recoverable, since it was attributable to supplies of business entertainment.
BMW appealed, contending
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