Deductible expense?

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in General accounting discussion
A client recently paid a small sum for my attendance as a 'visitor' at a BNI networking event.

Although I received a breakfast during my visit, he tells me that the sum was a contribution to the hire of the venue. He is a regular member, and chaired the meeting.

Is this is a tax deductible expense in his accounts? - I am concerned about the 'hospitality' element.

Thanks.
Simon

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Deductible expense?

    I would say not. Corporate hospitality of any description, other than for members of staff within HMRCs limits, are generally not allowable. I realise this may not be "hospitality" in the everyday sense, but I feel the expenditure may not be classed as directly linked to normal, everyday trade.

    Kind regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Deductible expense?

    Many thanks for your advice, Steve. That's my feeling, too.

    Simon
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Deductible expense?

    I'll play devils advocate...

    Could you not class this as Marketing, to generate new business?

    If you didn't run a business, you wouldn't go to a BNI meeting - therefore, wholly and exclusively a business expense?

    Ok, he's paid for you - but don't members get additional benefits for the introduction of new businesses? At least 'brownie' points, putting new business there way.

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Deductible expense?

    I've been to a BNI meeting before and I don't run a business. :?

    FL Memo 2006/2007 P. 21 para 158:

    No deduction is available for business entertaining costs. Entertaining includes all forms of hospitality. The only exception is staff entertaining which may be deducted but may also be a taxable benefit in kind as discussed in para 1382.

    Kind regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Deductible expense?

    I think that although these meetings do include a breakfast the payment is for hire of the room on which the meeting takes place - the breakfast is just an added bonus, the meetings generally take place before normal working hours. You would attend primarily to 'network' and gather new business. I wouldn't class it as entertaining at all.

    Can't see how it's any different to a directors' meeting with some subsistance :?

    The more I think of it the more I think I would allow it.

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Deductible expense?

    My advice was given primarily on experience of dealing with HMRC in these cases - they argued that whilst this type of expenditure is deemed somewhat relevant to the trade - it isn't incurred in the normal course of trade - my quote was based on citations by HMRC in their correspondence.

    Directors meetings are effectively "staff" which are governed by the normal £150 per head rules.

    Kind regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Deductible expense?

    Steve, I'm not saying that your advise was wrong, I agree with the technicality of what you have said 100%.

    I'm merely said that I don't think this type of expenditure is clear cut.

    I can't see how the Revenue can say that "it isn't incurred in the normal course of trade" if that were true then surely you wouldn't be allowed a deduction for advertising or marketing?

    I just think this is an interesting point and one that because of the text book the tax payer might loose out - like I said I was playing devils advocate. :)

    I'd allow it, i'll fight the enquiry :lol:

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Deductible expense?

    I agree with Dean.

    Certainly allowable in the hands of the member as a marketing activity.

    If an inspector wants to argue over £10 then so be it..

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Deductible expense?

    Absolutely. I agree materiality has to be of some relevance. However, one final point before I close on this matter would be an article written by ACCA's head of tax. I have included this as a matter of reference to posters/MIPs who come across this (grey) area again. Unfortunately I can't provide a link as it is in the member's knowledge library section.

    ".....hospitality, entertaining and sponsorship fall into this category. The first and last are legitimate items to be set against tax but the middle is not. The Inland Revenue always held entertaining is not tax deductible. The taxman accepts that promoting, advertising and marketing are business expenses which can be rightly set against tax but to eat or drink whilst in the process of marketing the enterprise is to be actively discouraged."

    Hence our eventual addback.

    Kind regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Deductible expense?

    "..to eat or drink whilst in the process of marketing the enterprise is to be actively discouraged."

    Bah humbug!

    :D

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