What Are Business Entertainment Expenses?
One of the fun things about running your own business is that you can choose to treat your staff, clients or suppliers to entertainment. Whether this is attending events, going for dinner or sending gifts to them for Christmas. This can be an important part of marketing for your business and getting the best deals from suppliers. We all dream of the invitations to the corporate box for a concert or sports event, and now you can start dishing out the invoices. But what do you need to know about business entertainment expenses?
Read more: Business Expenses – what is and isn’t allowed
Are Business Entertainment Expenses Tax Deductible?
However, on the whole these are sadly not classed as tax deductible business expenses. This means they need to be added back to the profit in the corporation tax computation to calculate the tax owed.
Business entertainment covers any kind of hospitality or events that you provide for free to clients or suppliers.
While you will not be able to get the tax deduction for these costs it is still sensible to pay for these from the business account. They are still legitimate business expenses, so you do not want to be paying for this personally with money that you have withdrawn from the business and paid income tax on.
Read more: What does ‘tax deductible’ mean?
Handling VAT on Business Entertainment Costs
You will also not be able to reclaim VAT on the cost of business entertainment, so be careful how you enter these receipts for your VAT returns.
Read more: Gov.uk info about Business Entertainment Expenses
Allowable Entertainment Expenses for Staff and Clients
There are a few exceptions where the cost will be allowable for corporation tax. Staff entertainment is an allowable expense, up to £150 per staff member, including VAT. This allows you to have a staff Christmas party or event. If you go over £150 per person unfortunately the whole cost becomes disallowable, so do not overspend. As always, make sure you keep receipts!
The other main exception is that you can provide small gifts to clients or suppliers if they display a prominent advert. These can cost no more than £50 a person and will need to include an advert, so have your business logo and details on for example. These type of advertising items are allowable for corporation tax, and explains why I have hundreds of tote bags and water bottles from various accounting services.
Read more: What are ‘trivial benefits’?
If in doubt we are happy to talk through what counts as business entertainment expenses, and what else might be classed as tax deductible business expenses, contact us today!
