Professional networking expenses

MrNotty

I wonder if anyone can clarify this. It is my understanding that the self employed cannot claim expenses for coffee/lunch for a client or colleague they are meeting - or even for themselves at such a meeting.

However an accountant told a friend who was self- employed for awhile that the tab could be put against expenses if it was professional networking (not entertaining a client). Another colleague paid for lunch when we were discussing a project but he is a limited company.

Can anyone clarify? Thanks

jimmo

In this instance I think it is worth looking at the legislation which says “
The general rule is that no deduction is allowed in calculating the profits of a trade for expenses incurred in providing entertainment or gifts in connection with the trade.”

http://www.legislation.gov.uk/ukpga/2005/5/section/45

As with so many rules there are exceptions, but not many,

http://www.legislation.gov.uk/ukpga/2005/5/section/46

Here Case A covers professional entertainment providers so that if , say an insurance company pays an entertainment provider to provide entertainment, the insurance company will not be able to claim tax relief on the money it pays to the entertainment company but, under Case A, the entertainment company will itself be able to deduct everything it spends in the normal course of its business.

Case B is, I trust, self explanatory.

Speaking as a former taxman, I think that is as straightforward as it can be. Entertainment is entertainment and is not allowable. Putting a different label on it, such as networking expenses, does not change the nature of the expenditure but it could well significantly reduce the chances of HMRC catching you out.

As regards your colleague who paid for lunch, he and his limited company are 2, separate, taxpaying entities and he is an employee of his limited company. One of them, not both, has to take the tax hit on the cost of lunch. If the company claims the cost against its corporation tax, the director pays the tax on the “benefit received.” If the company doesn’t claim it does not report a benefit to the director.

Blind1979

Disclose it on the Tax Return with a proper explanation of the nature of the expenditure and wait for HMRC to reject the claim.

If you don't ask you don't get!

See also dicussion at

www . accountingweb.co. uk /anyanswers/networking-meetings-tax-deductible

(sorry for above not allowed to post links!)

jimmo

Blind1979 wrote: »

If you don't ask you don't get!

These days the nature of Self Assessment is that if you “ask” by claiming on your Tax Return you will get because your figures will be processed. However HMRC could well come back at you, disallow your claim, increase your tax bill and charge interest and penalties on top.

If you want to ask HMRC then by all means ask but ask by letter or phone. Don’t do it by putting a figure on a Tax Return.