Business entertainment expenses – can I get a tax deduction for that?

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Business entertainment expenses extend beyond the staff party: there’s client entertainment to consider

 

 I want to thank my best customers for their continued loyalty by inviting them out for drinks.  Is this a tax deductible expense?

In a word, no, it’s not.  Expenditure on client entertainment is specifically disallowed from calculating taxable profits by the tax acts.  Business entertainment expenses include accommodation, food, drink and any other form of hospitality (including gifts).

My staff incur expenses when bringing clients out for lunch.  Does this mean they are liable to tax on the reimbursement of those expenses? Or can they be reimbursed at all?

You can reimburse staff for business entertainment expenses and they won’t be taxed on it.  However, as it is client entertainment, the expense won’t be an allowable deduction for the business.

Party poopers! What about the staff Christmas party?

It’s not all bad.  The definition of business entertainment does not include anything provided for genuine staff members.   The staff party is therefore tax deductible (provided it’s just for staff and directors).

Don’t forget you can also give staff up to €250 in vouchers tax free, which can be an attractive alternative to a cash bonus.

What about VAT on entertainment can I re-claim this in my VAT return?

Sorry, the answer’s no, again!  You cannot reclaim VAT on food, drink, accommodation or entertainment expenses.

And gifts?

VAT and (non-food/entertainment) gifts is a little more complex.  If the gift is of something that is normally allowable as VAT on purchases in your VAT return you can reclaim the VAT.  However, the provision of the gift is considered to be a supply or sale for VAT purposes.  The supply is deemed to be of the same value as the cost of the gift, therefore cancelling any VAT advantage.  There is one exception though.  If the VAT exclusive value of the gift does not exceed €20, then the supply will not be a supply for VAT purposes but the VAT on the purchase can be reclaimed.

 

 

 

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