VAT on entertaining

VAT on entertaining

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Hello all

I have a client who held a large garden party at his home, as a networking and discussion event. His home is also the "office".

The costs of this event included food, drinks, tents, and various embellishments to the garden.

He would like the food and drink (bought from cash and carry) to appear as "catering" and he feels VAT should be claimed, whereas I do not.  Am I correct in this? 

Also, what is the appropriate treatment of the VAT on the purchase of tents, and the garden embellishments?  The latter of which will almost certainly provide a private element.

Thanks in advance!

Replies (6)

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Quack
By Constantly Confused
07th Mar 2013 09:42

Per Notice 700/65
1.2 Why do I need to know about business entertainment?

Because you cannot recover input tax incurred on the provision of business entertainment expenses.

2.1 What is ‘business entertainment’?

Entertainment is ‘business entertainment’ when all of the following conditions are met:

entertainment is provided - see paragraph 2.2it is provided to persons who are not employees of your business - see paragraphs 2.3 to 2.4 and 3.3it is provided free

Business entertainment provided to 'overseas customers' is not blocked - see paragraph 2.6.

 

Surely therefore any entertaining costs will be blocked from recovery, so I agree with you.

Of course if he is setting up a burger van in his garden and making a profit, I might change my mind, but I'm guessing he isn't.

Thanks (1)
By FoxAccountancyServices
07th Mar 2013 09:52

Thanks CC

No, no burger vans :))

What do you think about the costs of set up for the party? The tents, and more importantly, the garden items (candles, rockery, oil burners, heaters etc)??  Do you think it falls under these rules too?

 

 

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By spidersong
07th Mar 2013 10:10

Why did he buy those items?

What use do those items have to the business?

I would suggest;

1) Entertainment - So blocked from recovery.

2) Private use for Director - Not for the business so no business Input Tax to recover.

Unless he has an argument that would convince HMRC that the tents and embelishments have some use for generating taxable income, other than for entertainment purposes, then he has no recovery on them.

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By shaun king
07th Mar 2013 14:07

As Spidersong and Constantly confused have pointed out I cannot see how he can argue that these costs are not components of business entertainment and VAT recovery is disallowed.

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By The VAT Doctor
07th Mar 2013 14:40

A few ideas

Struggling here to find a refund...however...

What is the nature of the business?  I was thinking that, if the tents etc are also used for taxable income generating activities, then a partial refund could be justified.  why buy tents for a one off event, or are these regular?

If regular, are future events free?  If not, then  a reclaim may be due.

I think for this particular event, the food and drink is not allowable though.

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By FoxAccountancyServices
08th Mar 2013 10:39

Hi everyone

Thanks for some great answers.  I have emailed the client a few days ago asking who attended, what the purpose of the function was, and what happened to any of the more expensive items that were purchased for the event, as well as, asking whether I will see any further events being held - no reply as yet.  

Its one of those jobs and one of those clients! ;) How dull would life be without them!

 

 

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