Client Entertainment

net71

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?

Norvydas

@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.

net71

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 this

Norvydas

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.

net71

Thanks so much

MarieNoelle

Norvydas said:

@net71

I believe if a director takes the client out for a meal then you can claim 50% VAT.

It's not so simple I'm afraid. If the director acts as a host than the whole expense is disallowed.
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 helps

MarieNoelle

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

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.

Norvydas

MarieNoelle said:

Norvydas said:

@net71

I believe if a director takes the client out for a meal then you can claim 50% VAT.

It's not so simple I'm afraid. If the director acts as a host than the whole expense is disallowed.
There is a brilliant article from Neil Warren here

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

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.

Norvydas

@MarieNoelle

Thank you for your input, it's always nice to hear someones opinion that's more qualified and experienced!

net71

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?

RyanMIP

I can confirm you’re “getting this mixed up”.

net71

Thanks