Service provided or entertaining?

Service provided or entertaining?

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I have a client who is a contractor working via a limited company.

He has spent some £10k on restaurant bills (typically £200 a go) which is not his own subsistence over the course of a year, approx one a week. 

Attendees are in the main (but not exclusively) the staff of his main client in this period, and include the contractor. 

The contractor company raises an invoice for these meals and these invoices are duly paid by the main client. 

Ordinarily for entertaining, the contractor co is of course going to lose the VAT reclaim and CT deduction. 

However given the recharge to the end client of the full cost, can we argue the contractor is actually supplying a service here? And therefore reclaim the input VAT and a CT deduction?

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By duncanedwards
24th Mar 2015 17:46

Not sure about VAT but I think the CT deduction should be allowed; he is not doing any entertaining. I think the case would be substantially strengthened if the invoicing is clear as to what "service" is being provided. HMRC can then take up the deductibility of the charge with the client who ultimately bears it.

Is this arrangement documented?

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By ireallyshouldknowthisbut
24th Mar 2015 19:03

.

The arrangement is documented in that the sales invoice is quite clear what is it for (and the receipt attached).  The exact sum is charged. The overall arrangement is however I understand an informal one, in that its not part of the contract for service (which is an 'off the shelf' job from the PCG as it used to be called)

From an accounts point of view, it would be booked to "direct costs" and not "entertaining" in any case, given it is not a cost of the business, but a direct cost. 

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