Your Guide to Business Entertainment

Preparing for End of Year Celebrations

As businesses gear up for the festive season, planning for Christmas parties and end of year staff entertainment becomes a priority. This is an opportune time to understand the intricacies of UK tax allowances, VAT implications, and the distinction between 'entertainment' and 'subsistence', ensuring your celebrations are not only memorable but also financially prudent.

Understanding 'Entertainment' vs 'Subsistence' in Business

'Entertainment' Explained: Think of this as the enjoyable aspects of corporate hospitality – meals, event tickets, and special outings.

Understanding 'Subsistence': This refers to necessary expenses, like meals and accommodation, when employees are working away from their normal location.

Understanding 'Entertainment' in the Business Context

Definition and Examples of 'Entertainment'

'Entertainment' is defined as hospitality of any kind. This encompasses a wide range of activities and provisions, including:

• Provision of food and drink.

• Accommodation, such as hotel stays.

• Tickets to theatre, concerts, and sporting events.

• Entry to clubs and nightclubs.

• Use of luxury assets like yachts and aircraft for entertaining.

• Expenses related to hosting at sporting or similar events.

• Employees Included in Business Entertainment

For tax purposes, the term 'employee' includes:

• Individuals employed by your business.

• Directors and management personnel.

• Self-employed persons treated similarly to employees for subsistence expenses.

• Helpers and essential staff for running events.

• Exclusions from 'Employee' Definition

Certain individuals are not considered employees for business entertainment purposes:

• Pensioners and former employees.

• Job applicants and interviewees.

• Shareholders who are not also employees.

Key Tax and VAT Implications for Corporate Entertainment

1. Annual Events Allowance. £150 per head, per annum is allowed to be claimed for staff events, to cover all related costs. The £150 per head limit for staff events like Christmas parties is a threshold, not an allowance. If this limit is exceeded, the entire amount becomes taxable as a benefit in kind, rather than being exempt.

2. Client Entertainment. Expenses for client entertainment are not tax-deductible, and VAT is not recoverable. Differentiating between client and staff entertainment is crucial for tax purposes.

3. VAT on Staff Entertainment. VAT incurred on staff entertainment can be reclaimed if the cost remains within the £150 limit, as per HMRC guidelines.

4. Mixed Entertainment Events. VAT can be reclaimed only for the staff portion in mixed entertainment events. Accurate record-keeping is essential for compliance.

Conclusion

Working with an accountant can be an important step in effective tax planning, especially regarding UK tax allowances and VAT, and business entertainment is a great example. Understanding the critical difference between 'entertainment' and 'subsistence', as well and tax rules involved, is key for financially sound corporate events.

How We Can Help

At Rosevale Accountants, we understand that every business is unique, with its own set of challenges and opportunities. That's why we are committed to offering personalised accounting services that are tailored to the specific needs of your business. Whether it's navigating the intricacies of UK tax allowances, VAT for business entertainment, or any other accounting needs, our team of experienced professionals is here to guide you.

Visit our website today to schedule your discovery call.

This blog is designed to provide general information and should not be considered as financial or tax advice. Always consult with a professional for specific advice tailored to your situation.