Client Entertainment
net71
Registered Posts: 11
I understand that when entertaining clients and buying client gifts, corporation tax and VAT can not be claimed on this as an expense but can the transaction be submitted and paid by the limited company or would this be a personal expense to the director?
And
Would gift cards sent to clients be treated the same?
And
Would gift cards sent to clients be treated the same?
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Comments
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@net71
I believe if a director takes the client out for a meal then you can claim 50% VAT, and you need to disallow 50% on C. Tax. If it's more guests for example 4 guests and 1 director again you would apportionate this correctly. If company pays something solely for a client then this would be 100% disallowable i.e. football season tickets.
Gifts cards are classified as entertainment and they would be 100% disallowable.Kind Regards,
Norvydas Valavicius.0 -
Thank you for your reply.
100% disallowable - does this mean that the transaction would have to treated as DLA/personal expense or does it mean disallow for Corp Tax and VAT purposes?
Thanks again. Just trying to get my head around this0 -
So you would post this to Entertainment nominal, it is still an business expense, it's just disallowed on C. Tax calculation and for VAT purposes.
i.e. a gift card to the client;
CR: Bank
DR: Entertainment
i.e. Director + client meal total £50.00
CR: Bank £50.00
DR: Entertainment £25.00
DR: Travelling & Subsistence £25.00
If of course, the Director has paid for entertainment from their own private funds then yes you would credit DLA account and DR an Entertainment, but if it's been paid via bank then just CR Bank.
Kind Regards,
Norvydas Valavicius.1 -
Thanks so much0
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It's not so simple I'm afraid. If the director acts as a host than the whole expense is disallowed.Norvydas said:@net71
I believe if a director takes the client out for a meal then you can claim 50% VAT.
There is a brilliant article from Neil Warren here
https://www.icaew.com/en/technical/business-resources/legal-regulatory-tax-governance/tax/let-me-entertain-you-when-can-vat-be-claimed
The HMRC VAT manual provides further guidance here
https://www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit43200
Hope this helps0 -
If it is a genuine expense of the business it should indeed be shown on the accounts as such. The tax treatment is a separate matter.net71 said:I understand that when entertaining clients and buying client gifts, corporation tax and VAT can not be claimed on this as an expense but can the transaction be submitted and paid by the limited company or would this be a personal expense to the director
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I believe if it's an business meal i.e. a director takes the client or a potential client for a meal to discuss business matters then the half of the cost (the directors portion) is an allowable expense?MarieNoelle said:Kind Regards,
Norvydas Valavicius.0 -
Hi @Norvydas
I think it's a judgement call as to whether the director is acting as a host or not. Say he is working on a project for a client away from his home or office, I agree that his lunch would be classed as subsistence whether or not he pays for the client (which would always be disallowed).
If he is meeting a new client in a cafe near his home I would class the whole bill as entertainment.
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@MarieNoelle
Thank you for your input, it's always nice to hear someones opinion that's more qualified and experienced!
Kind Regards,
Norvydas Valavicius.1 -
If it is a genuine expense of the business it should indeed be shown on the accounts as such. The tax treatment is a separate matter.
I thought if a gift could be exchanged for alcohol, tobacco or money then it is not a genuine expense so the Director would need to pay for this personally ie Directors Loan Account or am I getting this mixed up?0 -
I can confirm you’re “getting this mixed up”.1
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Thanks0
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