Entertaining

Business Entertaining

If costs are incurred when entertaining business contacts, subcontractors or clients, these are referred to as business entertaining.

As long as they are for genuine business purposes they can usually still be claimed but they are treated as disallowable for corporation tax purposes.

Although business entertaining is not an allowable expense for corporation tax it is still a real cost for the company so it is beneficial to claim this back from your company – for example if you have paid £50 out of your own pocket on entertaining a client, it is usually better to claim this back from your company than to have to extract a further £50 in dividends to cover it.

As with any business costs they must be wholly and exclusively incurred for the purposes of your business.

HMRC may challenge a cost if it considers that the primary motive for incurring it is to obtain a private benefit for a director or employee.

In order to claim Business Entertaining make sure you keep the receipts and note the below:

• Who were you entertaining?
• For what business purpose?
• Where was it?
• When did it take place?

Staff entertaining

Staff entertaining costs are allowed, subject to the below limits. Staff entertaining covers entertaining costs for the directors and employees of a company.

An annual staff party is allowable as a business expense as long as the total cost is not more than £150 per staff member inclusive of VAT and other related costs such as travel and accommodation.

So if you are a husband and wife company that’s £300 in total.

It can either be a single annual party such as at Christmas or could be split into smaller events. The events should be ones that recur each year though.

If you go over the £150 limit then the whole cost becomes taxable not just the additional amount.

The £150 is the total cost for the tax year that is allowable for all events in total.

All staff have to be invited to the events.

Please note that sub-contractors count as clients, not staff, for entertaining purposes, so don’t invite anyone else!