Commentary

V7.437 Input tax—business entertainment

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.437 Input tax—business entertainment

Part V7 Tax planning | Commentary

V7.437 Input tax—business entertainment

General rules for input tax deduction

The basic rule for VAT purposes is that input tax cannot be reclaimed on business entertaining expenses, unless it relates to employees of the taxable person, or to overseas customers. A separate analysis of the issues concerning overseas customers is considered below. For an event that includes both employees and non-employees, the input tax on the employee costs cannot be reclaimed if their function is to act as hosts for the non-employees.

The definition of business entertainment is extensive and HMRC regard entertainment as including all of the following facilities:

  1.  

    •     provision of food and drink

  2.  

    •     accommodation in hotels

  3.  

    •     entry to clubs and nightclubs

  4.  

    •     theatre, concert or sporting tickets, and

  5.  

    •     the benefits of using capital assets such as yachts and boats for entertaining

There are circumstances where input tax can be reclaimed on costs relating to non-employees:

  1.  

    •     self-employed persons (subsistence expenses only) who are treated in the same way for subsistence purposes as the employees of a company

  2.  

    •     helpers, stewards and other people essential to the running of sporting or similar events

  3.  

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