Free cake and glass of Prosecco - allowable expense?

MTJR

Hi,

A salon is celebrating its first birthday, and to celebrate it’s giving a free cupcake and glass of Prosecco to its customers for its birthday week. Would this be classed as entertainment and therefore not an allowable expense?

The salon has also bought balloons and other party decorations.

Thanks

uis143

Hi MTJR, I would disallow these costs as business entertaining. HMRC give the example of a book launch at BIM45050, where the cost of food and drink would be disallowed as entertainment.

MTJR

Thanks for your reply, this is what I thought. What about decorations - balloons, streamers etc.?

uis143

I think that the balloons, streamers etc. would count as costs incidental to the business entertaining and so be disallowed on this basis.

uis143

Though maybe it could be argued that the decorations are allowable advertising, especially if they have a logo for the business.