Reclaiming VAT on entertainment of foreign customers

Written by yasiradnan94
8 March 2020

Businesses can reclaim VAT on costs incurred for their business provided they will be used in making VATable supplies (i.e. sales that include VAT).


The law specifically blocks VAT reclaims on entertainment costs except for those incurred on staff entertainment and entertaining overseas customers.

ENTERTAINMENT

Business entertainment includes hospitality of any kind with the most usual form being client dining but also extends to accommodation and theatre and sporting tickets.

reasonable test

Whilst the VAT on entertaining overseas customers can be reclaimed, it will be of any benefit to the business unless it is ‘reasonable’. Reasonable is not strictly defined so it should be taken in its ordinary meaning. Where the cost is not reasonable HMRC rules state that the supply of the services (i.e. meal) must include output VAT negating any benefit to the business of reclaiming VAT.

An example of what is reasonable – refreshments such as sandwiches and soft drinks for the duration of a meeting can be essential to the smooth running of the meeting lasting several hours and therefore any VAT reclaim should be allowed.

However, a three-course meal with alcohol is not necessary for the purposes of the meeting and any VAT will be accounted for on it as a perk.


AJN Accountants are specialists in helping contractors, freelancers and small businesses to save tax and time.

Please contact us for more information:

E: [email protected]
T: 020 3488 2435

twitter
Follow AJN Accountants on Twitter for regular updates.

Crypto investors urged to declare gains

HMRC has reminded investors in cryptoassets that they should declare any income or gains above the tax-free allowance on a tax return.

VAT Fraud & The Risks to Your Business

In the world of VAT, a business can be unaware of a fraud in the supply chain and still be regarded as a fraudster.

Holiday Pay Changes

If you engage part time workers, or staff who work irregular hours, on permanent contracts you need to be aware of new rules.

Related Posts

VAT on energy saving materials

VAT on energy saving materials

The zero rate of VAT has been extended to include the installation of additional energy-saving materials (ESMs) from 1 February 2024.

Making Tax Digital: quarterly update returns

Making Tax Digital: quarterly update returns

HMRC has confirmed the mandation dates for making tax digital for income tax self assessment (MTD SA) as announced in the Autumn Statement 2023. From April 2026, taxpayers subject to income tax on their trade, profession, property income or business and who have...

We use contact information you provide to us to contact you about our relevant content, products, and services. You may unsubscribe from these communications at any time. For information, check out our Privacy Policy.