In general VAT legislation does not allow you to claim VAT that you incur on costs relating to Business Entertainment. VAT legislation describes Business Entertainment as being the free of charge provision of food, accommodation and entertainment of any kind to UK based people who are not your employees.
This restriction does not apply to VAT you incur on costs relating to Business Entertainment provided to overseas clients visiting the UK. However if the Business Entertainment includes, what HMRC considers to be a private benefit for the overseas client, you may be required to account for VAT on this private benefit.
Q. I am meeting UK based clients for a business lunch and will be paying the costs in full. Can I claim the VAT I am charged?
No. The costs incurred relate specifically to Business Entertainment and therefore no VAT is claimable.
Q. During a business trip made to provide business services to an existing customer I met a new client for a business lunch and paid the lunch bill in full. Can I claim the VAT on my meal?
Yes. The cost of the new client’s meal is Business Entertainment so the VAT relating to that meal cannot be claimed but, as the reason for your trip was not for the purposes of the meeting, your meal is considered ordinary subsistence and therefore the VAT on your meal can be claimed.
Q. I am holding a meeting with a client from overseas and will be providing refreshments and a simple buffet as part of the meeting. Can I claim the VAT on the cost of the refreshments and buffet?
Yes, the rules restricting the recovery of VAT you incur on the provision of business entertainment does not extend to entertainment provided to overseas clients.
Additionally, the provision of refreshments and a simple buffet as part of the meeting would be unlikely to be seen as having any private benefit for the overseas client.
However if you had provided more than refreshments and basic catering to an overseas client, for example a meal at a restaurant or entry to a sporting event, HMRC considers there to be a private benefit to your client. In these circumstances you would be required to declare VAT on this private benefit and HMRC expects the value of the VAT you declare on this private benefit to be the same as the total value of VAT you have claimed in providing the entertainment. You may therefore instead chose not to claim the VAT on the cost in the first place.
Q. If I hire a hospitality box at the local Premiership football ground and use it to entertain current or potential UK based customers can I claim the VAT on the lease?
This is Business Entertainment but generally it is accepted that the cost of the hire of a hospitality box includes an element of business advertising and while you cannot claim VAT on Business Entertainment you can claim VAT on advertising.
More and more suppliers of hospitality boxes are separately showing the charge for the hire of the box and the charge for advertising on their invoice and provided they have done so you can claim the VAT charged on the cost of advertising. However if the invoice shows no separate charge then no VAT can be claimed.
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