What is business entertainment and can we classify it as business expenses?

What is classified as a business entertainment in relation to the clients:

  1. Food and drink
  2. Presents
  3. Cinema or theatre tickets
  4. Sports events tickets
  5. Entries to the clubs

One would think that if we have meeting with our client and invite him or her for a coffee or a meal it is classified as business expense. Potentially it will help us with getting in new business and build our brand. The same we sometimes buy present as a thank you to the client.

Unfortunately these are not business expenses!

Business entertainment is not classified by HMRC as business expenses. As a result you cannot deduct it as an expense to reduce tax bill. The same you cannot use it to lower VAT liability as business entertainment is 0% VAT.

Exemption

Present for clients for marketing purposes – such as pens, notepads, mouse pads – with company logo or name, up to #50 per person.

But it cannot be food, drinks, tobacco or gift vouchers.

Why business entertainment?

By inviting clients for the coffee or meal you build company image and promote your business and your services. You cannot treat it as business expenses but classifying it as business entertainment you prove that it is connected to your business and it is not private expenses. As such you do not have to declare as owner’s drawings and pay personal tax.

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