Clients and Suppliers
Unfortunately, however you entertain clients and suppliers HM Revenue and Customs (HMRC) states that you will not be able to claim tax relief. Even business dinners do not qualify, although you can reclaim your own subsistence costs. Despite this, paying for client entertainment through your company is still the most efficient way to cover the cost involved, as the alterative – withdrawing the funds to pay the costs personally – will leave you subject to income tax.
Employee Entertainment
For tax relief and VAT to be reclaimed, the purpose of your event must be to purely entertain your employees (specifically those on your payroll). If the event is solely for directors or partners, or if you are a sole trader, HMRC states that tax relief and VAT deductions will not apply. The other criteria that you must meet to guarantee that you do not have to report anything to HMRC or pay tax and National Insurance are:
- Budget – you must ensure your spend is £150 or less per head
- Annual event – such as a summer social or Christmas party, or you can do multiple events throughout the year, providing the cost of the combined events is still no more than £150 per head
- Open to all of your employees – all of your employees must have the option to attend