Tax Tip Week 21 - Entertainment - An allowable expense?
Entertainment is not an allowable expense that may be claimed against profit to reduce corporation tax. However, in some circumstances, Input VAT may be reclaimed.
In other circumstances, ‘entertainment' may not be classed as ‘entertainment' for tax and VAT purposes!
To determine what expenses may be deducted under the description of ‘entertainment' then a distinction needs to be made between business and personal as different rules apply to each.
Entertainment for a director is not an allowable expense, however, if the director entertains clients when the director has worked a late shift this would be a combination of subsistence (for the director) and business entertainment for the clients. The input VAT on the proportion of expense attributable to the director may be claimed, but not that of the clients.
For Professional Contractors and Freelancers registered on the Vat Flat Rate Scheme, no input VAT may be re-claimed. In these circumstances a claim for subsistence may well qualify.
Please refer to the full details in our Knowledgebase - Entertainment Expenses.