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SDB Accountancy Services providing financial services throughout the North East of England.
Servicing Business within \nthe North East for 10 years
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VAT Staff Entertainment.

Friday, 9 November 2012

Input tax may be recovered in respect of staff entertainment where it is provided in order to maintain and improve staff relations. If provided in any other circumstance, any VAT incurred is not recoverable.

Where staff are permitted to bring a guest to a function, the input tax incurred in relation to the entertainment of non-employees must be identified. If no charge is made for the guests HMRC will expect 50% of the input tax to be disallowed.

Example:

  1. A Limited pays for a Christmas meal for all of its employees. This is staff entertaining and A Limited can recover all of the input tax.

  2. B Limited pays for a summer ball, to which employees can bring a guest for free.


B Limited must apportion the input tax so that no recovery of VAT is made in relation to the proportion which relates to the guests.

VAT on Business Entertaining.

The VAT on business entertainment ( except entertainment of overseas customers) is blocked ie you cannot claim the input tax. Business entertainment is defined as entertainment or hospitality of any kind provided for business purposes to anyone whom is not an employee.

If a taxable business is obliged to entertain others under a reciprocal agreement, input tax is not blocked because this is a supply for consideration.

Subsistence.-General.

If you pay an employee a flat rate for subsistence expenses then you cannot claim as input tax any VAT incurred on those expenses.

If the business pays the actual cost of the supplies then you can claim the input tax incurred.

If the business pays a proportion of the actual costs then can treat as input tax the VAT fraction of the amount the business pays.

Subsistence-Meals.

If your business provides canteen facilities for you or your staff then you can treat all the VAT incurred in providing these facilities as input tax. ( not relevant to you put in for completeness.)

If your business pays for meals for employees then you can treat any vat incurred as your input tax.

If you are a sole proprietor, partner or director then you can treat as input tax the VAT on meals you take when you are away  from your normal place of work on a business trip. BUT you cannot recover the VAT on meals which are not taken for business purposes.

Hotel accommodation.

When you or your employees are away from your normal place of work on a business trip, you can treat as input tax all VAT incurred on hotel and similar accommodation.

Please remember the above when you and your staff are completing the expense forms.

  

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