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Entertaining foreign customers

Entertaining foreign customers

Entertaining foreign customers, and foreign customers whilst abroad - is it still tax allowable?

It used to be but I have been advised it no longer is! If so, when did it change and why?

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17th Aug 2012 19:16

I cannot ever remember being allowed entertinment foriegn customers being allowable - but I may be proved wrong!

 

VAT is deductable

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By DMGbus
17th Aug 2012 21:20

Foreign USED TO BE allowable for CT / IT

mawallace wrote:

I cannot ever remember being allowed entertinment foriegn customers being allowable - but I may be proved wrong!

 

VAT is deductable

For Corporation Tax (and Income Tax) purposes entertaining foreign customers certainly WAS allowable, at least in the late 1970's.

Not so anymore, can't recall when it changed (mid 1980's?).

It the late 1970's a major exercise on one client's annual accounts was the analysis of extensive meals / hotel costs.   I specifically remember two analysis categories, "Foreign Allowable" and "Staff Allowable".  Then there was UK (disallowable) and personal (charge to directors loan a/c).

Agreed, bizzare recent ruling that VAT is suddenly recoverable on entertaining EC people but not UK people (unless staff).

 

 

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18th Aug 2012 14:28

I did a Google and came across an interesting (though long document) that sets out the orginal thought behind the complciated business rules you refer to! Seems the Goverment of the day saw business entertainment as "grossly unfair" and "fudged" the disallownace issue.

 

Some great quotes - and P11d (or equivalant) was at £2,000 in those days!

 

See

http://www.ctl.law.cam.ac.uk/File/tax_history_conference_2010/papers/Bus...
 

A bit more googling reveled the the overseas allowance was repealed by the FA 1988

 

Subsection (2) of section 577 of the Taxes Act 1988 (which excepts the entertainment of overseas customers from the general rule that entertainment expenses are not deductible for tax purposes) shall not have effect in relation to entertainment provided on or after 15th March 1988.
(2)Subsection (1) above shall not apply where the expenses incurred or the assets used in providing the entertainment were incurred or used under a contract entered into before 15th March 1988

 

 

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By dstickl
18th Aug 2012 14:13

Q:Is there any page on HMRC CT website that covers foreign csts?

I can't see any ref to tax deductible costs of entertainment of foreign customers on:- 

http://www.hmrc.gov.uk/paye/exb/a-z/e/entertainment.htm#1 

QUESTION: Is/are there any other page/s on the HMRC website for Corporation Tax profit calculation topics that covers this area, either way, please?

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19th Aug 2012 09:10

As we have said, unless the business is in the business of providing entertainment, entertainment of any sort, to whoever, is not tax deductable

 

It is only allowed if there is a contractable obligation to provide entertainment,

 

The HMRC manual section starts at:-

 

http://www.hmrc.gov.uk/manuals/bimmanual/BIM45000.htm

 

 

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