What Entertainment Expenses Can I Claim?
Entertaining can be a great part of running a business. However, when it comes to reclaiming expenses, HMRC has a complex and strict set of rules. And, if it involves corporate entertainment costs, many business owners easily make serious mistakes.
Does this sound familiar? Are you unsure what expenses you can claim? Keep reading…
What is classed as entertainment?
As a business owner you will have plenty of costs and expenses. That’s why it’s important to understand what is classed as entertainment in the business world, so you know how much you can potentially save.
HMRC defines these expenses as the cost when providing free or subsidised hospitality. This can be, but is not limited to:
- Food and drink
- Theatre and concert tickets
- Sporting events
- Business gifts
This includes ‘business entertainment of clients’ – to discuss work or with the purpose to maintain a business connection, for example. Or ‘non-business entertainment’ of clients, which is entertaining a business associate for social reasons.
What you can and can’t claim back
As noted earlier, there are plenty of confusing rules when it comes to what businesses can and can’t claim back. However, this strict stance creates a fair process meaning businesses can’t abuse tax-relief. Those eligible to claim expenses must go through a regulated procedure.
Unfortunately, a certain number of entertainment expenses are classed as non-allowable. This means they can’t be reclaimed for tax purposes. However, if you’ve registered your business then you can claim VAT back on certain things – if you’re not registered for VAT then you cannot.
Can you have staff entertainment?
One area that is eligible for tax-relief is staff entertainment. With this, you will be able to reclaim the VAT expense on entertainment costs.
This applies to annual events that are open to all of your employees. Although, if you host an event where there is a mixture of both employees and clients, you’ll only be able to reclaim VAT for the part that went towards entertaining employees.
As a business you can pay for this event and not worry about personal tax consequences – as long as the total amount paid doesn’t go over £150 per head. Ideal if you want to host a Christmas party for the office.
If you’re the sole employee, you can’t necessary hold a Christmas-do and invite a long list of guests. Employees have to be on your pay-roll to be able to reclaim VAT expenses for business purposes.
Expenses can be a complex, time-consuming process and even some of the largest companies can make mistakes. That’s where UWM Accountants come in. We’re a friendly team of cloud accounting experts based in Leeds. With over 30 years’ experience, we can assist and advise you on all your expenses issues. With our help, your accounts will run smoothly all year round. Get in touch today and see how we can help your business.