Business and staff entertainment

Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Business and staff entertainment
  • What is business entertainment?
  • What is entertainment?
  • Is the person an employee?
  • Can VAT be recovered on entertaining overseas customers?
  • Corporate hospitality events
  • What happens if the item is used for business purposes and business entertainment (dual use)?
  • Any there any exceptions?
  • What is the VAT treatment of the disposal of goods used for business entertainment purposes?
  • What is employee or staff entertainment?

Business and staff entertainment

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

This guidance note provides an overview of the VAT treatment of business entertainment expenses.

For details of when VAT is recoverable on entertaining expenses, see our interactive flowchart. Alternatively, for a static pdf, see the Flowchart ― recovering VAT on entertaining expenses.

What is business entertainment?

Entertainment is deemed to be business entertainment if all of the following conditions are satisfied:

  1. entertainment is provided to individuals who are not employees of the business

  2. it is provided completely free of charge

HMRC Notice 700/65; De Voil Indirect Tax Service V3.446; VIT43200; 2006/112/EC, Article 176; VATA 1994, s 84(4)(c)

Please see below regarding the provision of entertainment to overseas customers.

What is entertainment?

Entertainment is described as the provision of hospitality of any kind provided by a taxable person in connection with a business carried on by him. Entertainment includes the provision of the following (this list is not exhaustive):

  1. food and drink

  2. accommodation

  3. concert and theatre tickets, etc

  4. admission to sporting events and facilities, etc

  5. entry to clubs, etc

  6. using business assets, such as yachts and aircraft, to provide entertainment

VAT (Input Tax) Order, SI 1992/3222, Article 5(3)

Is the person an employee?

The following table gives provides details who is and is not treated as an employee for the purposes of these provisions:

EmployeeNot an employee
A person employed by the businessRetired employees
Directors or anyone who is responsible for managing the businessFormer employees
Partners in a businessPartner, relative or friend of an employee
Helpers, stewards and other individuals who are responsible for

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