vat question

Blocked business entertainment or recoverable input VAT?

VAT Question

My client is a business mentor who provides coaching services to businessmen and women. Their customers also subscribe to a membership club whereby they get to attend meetings and business conferences with likeminded business owners to exchange ideas. The membership package includes breakfast or lunch when attending these events, depending on the time of day these events are held. Is the input VAT my client incurs for providing these meals recoverable input VAT, or is it blocked business entertainment?

VAT Answer

This is an interesting question, and the VAT treatment depends on what the wording is in the membership package sold to the customer.

If the meals are available to every member and the breakfast or lunch is listed as included in their fee for the membership package and they must be itemised as such (so not just shown as saying the conference includes a free meal), then the cost of providing the meals would be part of the taxable supplies charged to the members, and in turn the VAT incurred in providing these meals would be recoverable input VAT.

However, if the meals are shown as free lunch for those attending the meetings or conferences, then HMRC would treat this as non-recoverable business entertainment.

These rules would also apply if your client met up with their customer in a coffee shop and bought them refreshments; HMRC would treat this as non-recoverable business entertainment as it is a free supply.

The only way for these refreshments to become a recoverable taxable supply would be if they were recharged on to the customer as a taxable, separately itemised line on an invoice after the meet up, and I don’t know of any business that would do that these days.

Annette Teesdale , VAT Consultant

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