"one man" party

A new client (sole director in a one-man ltd company, no other employees) took himself and his girlfriend out for a nice meal last Christmas. He wants to claim the VAT and for the expense to be CT deductible (of course).

We have already expressed our opinion that it is not. However the client has found let-outs in the guidance we have quoted and we'd be most grateful for the opinion of the community!

 HMRC's guidance at EIM21690 isn't helpful, and neither is the legislation:

Annual parties and functions

(1)This section applies to an annual party or similar annual function provided for an employer’s employees and available to them generally or available generally to those at a particular location.

(2)Where in the tax year only one annual party or similar annual function to which this section applies is provided for the employer’s employees, or the employees in question, no liability to income tax arises in respect of its provision if the cost per head of the party or function does not exceed £75.

(3)Where in the tax year two or more such parties or functions are so provided, no liability to income tax arises in respect of the provision of one or more of them (“the exempt party or parties”) if the cost per head of the exempt party or parties does not exceed £75 or £75 in aggregate.

(4)For the purposes of this section, the cost per head of a party or function is the total cost of providing—

(a)the party or function, and

(b)any transport or accommodation incidentally provided for persons attending it (whether or not they are the employer’s employees),

divided by the number of those persons.

(5)That total cost includes any value added tax on the expenses incurred in providing the party, function, transport or accommodation.

From Nichola Ross Martin's site:

Qualifying conditions

1. The party has to be for all the staff, or if you have divisions or sections you may hold a party for that division or section, separate from the other ones.
2. There is no tax relief if an event is solely for directors and their families (unless you are the owner-manager, or a family company and you happen to be the only employee(s)).
3. Other guests may be invited too, but the primary purpose of the event must be that of entertainment for all the staff.

Client has highlighted the bit in bold and points out that this is him, so that means the "party" does qualify.

Also from Nichola's site:

VAT and annual functions

1. Input VAT is fully reclaimable on the cost of the function (as it is "staff welfare" and not regarded by HMRC as entertaining), unless you are an owner-manager and having a one-man party, or if the function is mainly for directors (and so excluding other staff). In these circumstances HMRC will block claims for input tax.

Client says he was not having a one man party because his girlfriend was there (!) and therefore the input VAT is claimable too.

Thanks very much in advance.