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Claiming VAT on Business Entertainment

Question

My client is throwing a summer party for his staff and are allowing the staff to bring a guest. They have incurred VAT on the hire of the venue, entertainment and catering. Can my client claim this VAT?

Answer

Yes, but only the proportion of the VAT incurred that can be said to relate to the staff. The VAT incurred in regard to attendees that are not staff is restricted under the Business Entertainment rules. The VAT will therefore ned to be apportioned accordingly.

However, there is an alternative which your client could use to enable him to claim all the VAT he incurs on the party.

HMRC advises that entertainment is Business Entertainment when it is provided free of charge to anyone who is not an employee. Therefore, if your client were to make a small admission charge to the non-employees then the entertainment would not be provided free of charge and thus would not be Business Entertainment.

Although your client would be required to declare VAT on the admission charges, by charging for admission he would also be able to recover all VAT incurred in throwing the party.

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