Get up-to-speed with entertainment tax ahead of an exciting summer of sport

Irrespective of no Olympic Games this summer, the UK still boasts some of the most high profile and sought after sporting events providing an excellent opportunity to wine and dine clients in an enjoyable environment helping to win, woo and influence.

Whether you are looking to entertain at the Ashes, Wimbledon, Silverstone or the Henley Regatta, HMRC’s change of position on claiming input tax for entertaining expenses is good news for budget holders as UK businesses hosting corporate hospitality events stand to benefit.

“The change in input tax law allows companies to recover a proportion of the cost associated with entertaining overseas customers, which can often be significant,” explains Owen Kyffin, Partner and tax specialist, Whitley Stimpson.  “Business owners should take particular care to ensure that they benefit by providing the requisite evidence to support their input tax claims.” 

According to HMRC, the UK’s 24-year block on recovering entertaining expenses, relating to overseas clients, was inconsistent with EU law.  HMRC now asks for businesses to supply details of their overseas customers, clarify the type of expenditure and provide evidence that the VAT incurred has not previously been deducted.

Recovering input tax on entertaining expenses is permitted in two specific scenarios: provision of refreshments for on site meetings, where entertaining facilitates the efficient running of a meeting, and purchase of basic refreshments for external meetings or events. Excessive expenditure or corporate hospitality days are not deemed to have a strict business purpose and therefore input tax deduction for entertaining expenses of this nature will not be accepted.

“As with the majority of business tax matters, gaining a full comprehension of the precise conditions of new legislation is paramount in terms of ensuring that business owners achieve the maximum benefit,” concludes Kyffin. “Understanding what is and isn’t permitted allows companies to navigate complex tax recovery claims more efficiently.”

Whitley Stimpson has provided sound tax advice to individuals and businesses for more than 80 years. For further information or to book an appointment with one of Whitley Stimpson’s tax specialists, please visit www.whitleystimpson.co.uk or call 01295 270200.