The company I work for organised a track day. The Director now wants me to reclaim the VAT. There were 30 UK customers, 10 potential UK customers, 19 employees and 1 director. Are there any circumstances where some or all of the VAT can be reclaimed? Our business has no connection with driving or the motor industry.
Given the cost averages nearly £1,000 a head, I assume this will have P11D implications, and that it should be added back for CT purposes.
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If you google "VAT on entertaining" you'll find relevant information. With the tax(es) at stake, I suggest "The Director" does the sensible thing and pays for some professional advice.
Have to say .....
If the Director can afford £60000 for a track day, he can probably afford a few hundred for some custom advice to see if the VAT's reclaimable.
With something like £12000 at stake, you shouldn't be relying on an internet forum for this. Too much potential for vital facts to remain undisclosed.
Two different types of supply
Based on the limited facts available it would seem that the VAT has a business purpose and so the position is:
VAT can't be reclaimed on the cost of the track day for the potential customers because it relates to the supply of business entertainment.The VAT can be reclaimed for the costs attributable to the staff and director because it's the cost of providing a benefit in kind. However where the entertainment is perceived to have a private element, in other words a motive for the employer apart from being good for staff moral or an incentive (and that might be the case here given the cost of the benefit), then a there is a supply by the employer for which they must account for VAT. This might in effect wipe out any VAT advantage from reclaiming the input VAT.
The way in which you might obtain some VAT advantage where 1. and possibly 2. above applies is to make a modest charge. Input VAT can be recovered, but the output amount is limited to the amount charged for supply.
The track day is P11D item for employees (assuming they are higher paid) and the director.
The cost of entertaining the customers must be added back for CT, but probably not that for the employees and director. The expense of the benefit is a deductible staff cost unless it is incidental to the provision of entertainment to the customers. The same rule applies for VAT Given the ratio of staff to customers it seems unlikely to have been incidental in this case.
EDIT: I hit the post button too soon - now amended slightly.
Thanks, that makes sense. The question is with the VAT specialist at the auditors. I feel better prepared for when I receive his phone call.
I hope it was worth it
Unless you are a very big company £60k is a lot for one outing. Purely being nosey, did it achieve anything?