Customer entertainment is generally subject to a block on VAT recovery. Paying for hospitality to support the business does not, on its own, make the VAT recoverable.
Staff entertainment and genuine business subsistence can have different treatment.
Identify who is being entertained
Record the purpose of the event and who attended. A staff event is different from an event at which employees are acting as hosts to customers.
Entertainment solely for business owners or directors also needs separate consideration. It should not automatically be treated in the same way as a staff party attended by other employees.
Distinguish subsistence
An employee’s necessary travel meal or overnight accommodation may be subsistence rather than entertainment.
The facts and purpose of the spending matter. Do not simply relabel part of a customer-entertainment bill as a staff meal to claim the VAT.
Costs involving non-employees or contract workers need particular review, including who is responsible for the expense.
Keep evidence for the treatment
Retain invoices, attendee details and an explanation of the business purpose. Where an event has different elements, any allocation must be supported by the actual arrangements.
Use HMRC’s business-entertainment guidance for the detailed rules and exceptions.
We can help review an unusual event before the return is prepared, so the VAT treatment follows the facts rather than the expense heading.