Business and staff entertainment

By Tolley

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

  • Business and staff entertainment
  • What is business entertainment?
  • What is entertainment?
  • Who is an employee?
  • Who is not an employee?
  • VAT treatment
  • Entertaining overseas customers
  • Dual use
  • Exceptions
  • Disposal of goods used for business entertainment
  • Employee entertainment

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

SI 1992/3222, Article 5 (subscription sensitive); VATA 1994, s 25(7)

For a flowchart containing details of when VAT is recoverable on entertaining expenses, see Flowchart - claiming input VAT on entertaining expenses.

For a discussion of case law relating to this topic, see the Business and staff entertaining – relevant VAT case law guidance note.

What is business entertainment?

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

HMRC Notice 700/65 ; De Voil Indirect Tax Service V3.446 (subscription sensitive); VIT43200; 2006/112/EC , Article 176; VATA 1994, s 84(4)(c)
  • entertainment is provided to individuals who are not employees of the business
  • it is provided completely free of charge

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):

VAT (Input Tax) Order, SI 1992/3222 Article 5(3)
  • food and drink
  • accommodation
  • concert and theatre tickets
  • admission to sporting events and facilities
  • entry to clubs, etc
  • using business assets, such as yachts and aircraft, to provide entertainment
Who is an employee?

For the purposes of these provisions the following are regarded as employees:

  • a person employed by the

More on Claiming input tax: