This guidance note looks at the rules for recovering VAT on entertainment. In particular, it consider the scope of the input tax ‘block’ for business entertainment.
For an overview of input tax more broadly, see the Input tax ― overview guidance note.
For in-depth commentary on the legislation and case law in this area, see De Voil Indirect Tax Service V3.446.
Basics of input tax recovery on entertainment
There is a specific input tax block on goods and services used for ‘business entertainment’. The effect of this block is that VAT cannot be recovered even if the other normal conditions for input tax recovery are satisfied (as set out in the Input tax ― conditions for recovering VAT guidance note). There is an exception to the block for the entertainment of overseas customers. VAT is technically recoverable in relation to such business entertainment, but subject to quite stringent conditions (at least in HMRC’s view).
Determining when the input tax block applies will not always be a straight forward exercise and confusion
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