‘Entertaining’ and what you can expense through your business
Clients and Business Entertainment Costs
The company can claim a limited amount of tax relief for business entertaining costs.
To be eligible, all costs (food, drink, taxis, tickets etc.) should be covered by the company, whether you’re buying coffees in Starbucks or throwing a party for your favourite clients.
Some social functions qualify for tax relief, like Christmas balls and annual summer parties.
Other events, like one-off meals or celebrations, are classed as a taxable benefit by HMRC – this means that directors and employees may have to pay some tax through PAYE.
To qualify for HMRC tax relief, your event needs to tick three boxes:
√ It is an annual event
√ It is open to all staff
√ It costs less than £150 per person present (one guest per employee is allowed)
If any of these conditions aren’t met, the full cost of the event becomes a taxable benefit.
Friday night drinks?
Entertainment expenses must be ‘wholly and exclusively’ for business purposes, so if you and an employee regularly try to claim your Friday night pub drinks as an expense, HMRC may ask questions..
Do your pub visits have a personal element?
Is the employee also a friend that you socialise with?
To prove that a social event is for the benefit of the company, it’s a good idea to write the name of attendees and the purpose of each event on the back of your bar and restaurant receipts.
Speak with the Experts
For expert advice on expenses for entertainment, speak to our team on 01825 748308