In many industries, there is an element of getting about and being seen in the right places to promote your business, network and keep up to date with latest innovations. Sometimes, you will head to a restaurant somewhere afterwards to discuss business. Elsewhere we talk about entertainment costs and the issues with this.
Can I claim?
You cannot deduct any expenses for entertaining clients according to H.M.R.C. regulations. The only allowable entertainment claims are for your own payroll employees and circumstances must fit into H.M.R.C.’ s qualifying standards, specifically:
open to all staff
annual event (e.g. New Year party)
cost less than £150.00 per attendee
If the event does not fit one of these standards you will not be eligible for a tax deduction.
You will find the “Entertainment” category on your Self-Employed expenses page.
So what about going to lunch with a sub-contractor or potential joint venture partner and picking up the tab as an expense, is this a legitimate business expense as you just happened to be eating steak as you chewed the fat about sealing a business deal to work together in what is essentially a networking and marketing event? Technically, they could be classed as external customers, but the regulations here are difficult to sift out on H.M.R.C.’s website.
They offer the following example:
“If a company hires a hospitality box at a football ground for a match day at a cost of £2,500, and incurs further costs of £500 on food and drink, the total cost is £3,000. If the event is attended by 10 customers and five employees, the unit cost is £200. The customers are exempt under Section 265. For the five employees this figure of £200 will be the amount of the potential benefit chargeable on each of them. Whether the employees are actually chargeable on this benefit depends if they are entitled to a deduction from the benefit, under Section 336 ITEPA 2003 ( EIM32615), via Section 357 ITEPA 2003.” (All clear there then!) They go on: “If three of the employees are sales staff required to attend as part of their employment duties, the provision of entertainment is likely to be incidental to the hospitality provided to the customers. If so it is classed as “business entertainment” under Section 577(5) ICTA 1988 (see BIM45000) and the cost should be added back in the employer’s tax computation and we would normally accept that the conditions for relief under Section 336 are met. Consequently there is no chargeable benefit for the sales staff. If the other two employees attend purely as a perk, they will not be entitled to relief under Section 336. They will be chargeable on a benefit based on the unit cost of £200. “
The key words: “entertainment… incidental to the hospitality provided to the customers…”
The problem with this example is that is geared towards larger companies with bigger profits than the sole trader, solo-preneur and small business owner who is just wanting to build their business by networking with colleagues and save some time doing so by ‘doing lunch’.
Well, if you’ll pardon the pun, after kicking this ball around for so long in researching what is a legitimate cost of doing business in the eyes of H.M.R.C. it gets wearing sweating it out and possibly kicking an own goal on your self-assessment forms…
Let’s make it easy for you… We’ll walk you through the game, for you to meet your business goals in such winning ways, you won’t mind picking up the tab every now and then with the money we can save you…
other keywords: act, comedy, movie, presentation, film, production, spectacle, showing, theater, theatre, exhibition, event, sport,