Recovering VAT on Entertainment

[Troy Steadman]

"Depending on how your business pays for subsistence and entertainment
expenses, you may be able to reclaim any VAT incurred."

http://tinyurl.com/5hot8

That is not my understanding, anyone know what situation the RBS is envisaging?

 

[vatark]

"Depending on how your business pays for subsistence and entertainment
expenses, you may be able to reclaim any VAT incurred."

http://tinyurl.com/5hot8

That is not my understanding, anyone know what situation the RBS is

envisaging?

I think it's rather badly worded. You can recover VAT on subsistence
expenses, although that may change when the infraction proceedings
against the UK reach their conclusion.

It is acceptable to recover VAT on entertaining expenses to the extent
that it relates to subsistence expenses. For example, if you go to
Manchester to see a client, and go out to lunch. The VAT on the cost
of your lunch would be recoverable as it can be argued to be
subsistence - you'd have had to buy lunch in Manchester whether you
took your client out or not.

 

[Ronald Raygun]

You can recover VAT on subsistence
expenses, although that may change when the infraction proceedings
against the UK reach their conclusion.

It is acceptable to recover VAT on entertaining expenses to the extent
that it relates to subsistence expenses. For example, if you go to
Manchester to see a client, and go out to lunch. The VAT on the cost
of your lunch would be recoverable as it can be argued to be
subsistence - you'd have had to buy lunch in Manchester whether you
took your client out or not.

What is the justification for being allowed to claim subsistence at
all? It seems rather odd. After all, he would have had to buy lunch
even if he had not gone to Manchester. Would this point by any chance
be at the core of the infraction proceedings you mentioned?

 

[Peter Saxton]

What is the justification for being allowed to claim subsistence at
all? It seems rather odd. After all, he would have had to buy lunch
even if he had not gone to Manchester. Would this point by any chance
be at the core of the infraction proceedings you mentioned?

If you were in the office kitchen you maybe able to get a reasonable
lunch for a few pounds. It may cost more if you were travelling.

 

[Tim]

If you were in the office kitchen you maybe able to get a reasonable
lunch for a few pounds. It may cost more if you were travelling.

You could take a packed-lunch, made in the office kitchen ... !

 

[Peter Saxton]

You could take a packed-lunch, made in the office kitchen ... !

It reminds me of your discussions regarding clothing about what's
allowable and reasonable.

I think people feel more able to push the boat out when they think
they will get tax relief on their lunch.

 

[Ronald Raygun]

If you were in the office kitchen you maybe able to get a reasonable
lunch for a few pounds. It may cost more if you were travelling.

I fully appreciate that, and also the fact that having to seek out
the cheapest alternatives (even in Manchester it must be possible
to find lunch for a few pounds) might waste time better spent on
the real purpose of the trip. But that hardly justifies going to
extremes and opting for an outrageously expensive meal, in effect
subsidised by IR.

Also, why should not the cost of one's usual lunch be deducted from
that of the away lunch, and only the excess be allowable? I guess
it's only the difficulties involved in establishing what that cost
is which prevent it being done that way.

 

[Ronald Raygun]

It reminds me of your discussions regarding clothing about what's
allowable and reasonable.

I think people feel more able to push the boat out when they think
they will get tax relief on their lunch.

Exactly. And isn't that a good reason why it should not be allowed?

 

[Peter Saxton]

Exactly. And isn't that a good reason why it should not be allowed?

Fair point but there are a lot of expenses that have an element of
"pleasure" that could have the same argument employed.

 

[Peter Saxton]

I fully appreciate that, and also the fact that having to seek out
the cheapest alternatives (even in Manchester it must be possible
to find lunch for a few pounds) might waste time better spent on
the real purpose of the trip. But that hardly justifies going to
extremes and opting for an outrageously expensive meal, in effect
subsidised by IR.

Also, why should not the cost of one's usual lunch be deducted from
that of the away lunch, and only the excess be allowable? I guess
it's only the difficulties involved in establishing what that cost
is which prevent it being done that way.

If it is not reasonable it can be disallowed.

 

[Simon]

I fully appreciate that, and also the fact that having to seek out
the cheapest alternatives (even in Manchester it must be possible
to find lunch for a few pounds) might waste time better spent on
the real purpose of the trip. But that hardly justifies going to
extremes and opting for an outrageously expensive meal, in effect
subsidised by IR.
Also, why should not the cost of one's usual lunch be deducted from
that of the away lunch, and only the excess be allowable? I guess
it's only the difficulties involved in establishing what that cost
is which prevent it being done that way.

Ronald, you've been a Civil Servant. Thats precisely the controls that are
placed on them whilst travelling.

Seriously, IR internal rules are much more stringent than S336 (formerly
S198) but that is to protect the public purse.

For all those out in the real world, it is enough that the expense has to be
incured as a result of the travel on legitimate business purposes.

This might seem generous and believe me, there have been lots of instances
when I would have liked to dissallow expenses but as the person was
travelling on legitimate reasons, the fact that he travelled on Concord or
First Class was irrelevant.

On the other hand, a person entitled to first class travel according to
company rules chose to use economy, took his wife and saved the company
money, he still incurred a tax charge on his wife. Theres that fairness
issue again.

 

[Jonathan Bryce]

"Depending on how your business pays for subsistence and entertainment
expenses, you may be able to reclaim any VAT incurred."

http://tinyurl.com/5hot8

That is not my understanding, anyone know what situation the RBS is
envisaging?

The only thing I can think of is where you business is the supply of
entertainment to people, and the entertainment is your normal business cost
of sales.

 

[Simon]

The only thing I can think of is where you business is the supply of
entertainment to people, and the entertainment is your normal business
cost
of sales.

Such as a Food Critic for a Newspaper perhaps?

Yes, I can understand a claim for the cost of the food in that instance, but
not for the wife and four friends they had with them.

I am not an expert on VAT but when I have seen this it has been analysed
according to the ration of staff and customers present.

This was fine to apportion the VAT but got them into hot water for CT as
they had applied the same rules to the cost of the meal.

 

[Michael Robinson]

VAT is not reclaimable on a 'subsistence element' of Entertaining.

If you entertain then all of the cost is entertaining with no distinction
for a subsistence element.

VAT is not reclaimable on this example

 

[Jonathan Bryce]

VAT is not reclaimable on a 'subsistence element' of Entertaining.

If you entertain then all of the cost is entertaining with no distinction
for a subsistence element.

If a member of staff also eats the meal, then what they eat is not
entertainment.

 

[Michael Robinson]

hi there

where an employee acts as a host as the company and entertains (and enjoys
the same entertainment) all of the input tax is blocked.

therefore, there is no 'subsistence' element to entertaining and no VAT is
reclaimable

VAT notice 700/65

BUT, if the co is entertaining for both employee and guests at same time the
employee proportion can be reclaimed.

Therefore the comment 'If a member of staff also eats the meal, then what
they eat is not entertainment.' is incorrect