Are expenses of attending client function tax deductable?

notanewuser

DH and I have a limited company.

In December we were invited to one of our client's festive events - an evening do with a meal and some entertainment. We attended and did some useful networking.

We had to travel, stay in a hotel and DH had to hire a dinner suit. We would not have done any of these things were it not for the event. Are any of these expenses allowable against our accounts?

martinsurrey

Not for tax.

Its business entertaining and so is disallowable for corp. tax.

*edit*

you can put it in your accounts as an expense, but when you calculate tax you'll have to add it back in as a none allowable expense

http://www.hmrc.gov.uk/manuals/bimmanual/bim45020.htm

Regshoe

I'm not so sure it is entertainment.

If the client running the event had paid for the accommodation on behalf of the OP and partner then that would be a dis-allowable entertainment cost for the client as host.

In this case though it sounds like the OP's Ltd has only paid for it's own employees - which would not class as business entertainment.

There might be a question mark over whether the costs then fall under normal travel and subsistence for employees or staff entertaining which might cause a benefit in kind for the directors - but that wouldn't affect it being a valid deduction for corporation tax purposes.

I would say on that basis you could include the travel & subsistence costs (transport, hotel meals etc.) but give due consideration to whether a benefit in kind has been created. Not certain, but I don't think the dinner suit would be allowable. If it's been paid for by the company I would think it is allowable for corporation tax, but there is a benefit in kind to the director. If paid for by the director I would not claim an expense for it and just keep it completly separate from the company accounts.

martinsurrey

Regshoe wrote: »

I'm not so sure it is entertainment.

If the client running the event had paid for the accommodation on behalf of the OP and partner then that would be a dis-allowable entertainment cost for the client as host.

In this case though it sounds like the OP's Ltd has only paid for it's own employees - which would not class as business entertainment.

There might be a question mark over whether the costs then fall under normal travel and subsistence for employees or staff entertaining which might cause a benefit in kind for the directors - but that wouldn't affect it being a valid deduction for corporation tax purposes.

I would say on that basis you could include the travel & subsistence costs (transport, hotel meals etc.) but give due consideration to whether a benefit in kind has been created. Not certain, but I don't think the dinner suit would be allowable. If it's been paid for by the company I would think it is allowable for corporation tax, but there is a benefit in kind to the director. If paid for by the director I would not claim an expense for it and just keep it completly separate from the company accounts.

Nope, if the event was attended by both, staff and suppliers / customers all costs are not allowable.

Don’t forget that the OP entertained the client with their presence as well, it does not matter who paid for what, the event was an event for suppliers/customers to get together and network (as the OP said) all costs in all books are non allowable.

This includes incidental costs as well.

martinsurrey

Just to clarify my above point

http://www.hmrc.gov.uk/manuals/bimmanual/bim45034.htm

it is clear that the OP's company would not have paid for them to go if there were no suppliers there, so it counts as business entertainment and is disallowable.

notanewuser

Thank you. Still quite confused.

It was an event in a hotel that the client bought x number for their staff and suppliers as a thank you. They paid for the tickets.

We attended (as thought it would be ungracious not to) and paid for travel and hotel, plus the hire of DH's suits. We are the only 2 employees. We would not have incurred those expenses were it not for the invitation, and turning it down may have hampered future contracts. For their staff it was entertainment. For us it was definitely work!!!

martinsurrey

notanewuser wrote: »

Thank you. Still quite confused.

It was an event in a hotel that the client bought x number for their staff and suppliers as a thank you. They paid for the tickets.

We attended (as thought it would be ungracious not to) and paid for travel and hotel, plus the hire of DH's suits. We are the only 2 employees. We would not have incurred those expenses were it not for the invitation, and turning it down may have hampered future contracts. For their staff it was entertainment. For us it was definitely work!!!

Business entertaining, not allowable for corporation tax.

notanewuser

martinsurrey wrote: »

Business entertaining, not allowable for corporation tax.

Okay. Perhaps we'll decline next year. It wasn't worth what it cost!!!

chrismac1

I would be claiming this on behalf of a client as follows:

1. The client is the one doing the entertaining here.
2. The guests are being paid travel and subsistence by their company.
3. In Notice 700/65 (May 2002) HMRC agreed that providing entertainment in intself was not the main purpose of the trip, costs were allowable.

So the worst case scenario in my view is that you have a barney with an inspector over what the main purpose of the trip was. I would be arguing it was making business contacts and developing trade leading to higher sales, profits and tax paid. He or she would no doubt argue the main purpose was just having a good time.