What is business entertaining?

What is business entertaining?

Didn't find your answer?

Have been having a think about this recently.

It's came up as a client or two may be taking the p*** with what they are classing as business entertaining!

Ok, so I would always say, costs incurred in entertaining customers, potentials, contacts etc. are all ok to be classed as business entertaining.

But according to HMRC "Business entertainment means the provision of free or subsidised hospitality or entertainment. The person being entertained may be a customer, a potential customer or any other person"

The 'any other person' is most interesting!

So I could entertain my brother and as long as we discussed my business it would be ok?

I think it is important to understand the definition of 'business entertaining' so we can decide if expenditure can be classed as this, or if it really is just personal expenditure which should be moved to the director's loan account.

I don't think there is any statutory definition so you would just need to take a common sense approach.

Anyone care to add anything?

Replies (3)

Please login or register to join the discussion.

avatar
By WhichTyler
10th Jun 2014 16:43

Cui bono?

As it's not allowed as a deduction against tax, why does it matter if he entertains his brother? 

If the client=director=shareholder, then it is of little consequence. But if an employee is entertaining family, and separate shareholder is ultimately picking up the tab, you would do well to recommend an expenses policy to avoid disputes later...

Thanks (1)
Replying to Vile Nortin Naipaan:
By JCresswellTax
10th Jun 2014 17:05

It matters because

WhichTyler wrote:

As it's not allowed as a deduction against tax, why does it matter if he entertains his brother? 

If the client=director=shareholder, then it is of little consequence. But if an employee is entertaining family, and separate shareholder is ultimately picking up the tab, you would do well to recommend an expenses policy to avoid disputes later...

If you are effectively claiming personal expenses as entertaining, you are using company funds to fund your personal lifestyle, instead of taking salary/dividends which are taxed to fund the same expenditure.

Thanks (1)
By johngroganjga
10th Jun 2014 17:07

To state the obvious, for it to be business entertaining it has to be for purposes of the business.

I disagree with @WhichTyler that the distinction is academic.  Personal entertaining (by which I mean all entertaining paid for by companies that is not business entertaining) is, perversely perhaps, allowed for corporation tax because it will be someone's personal BIK, and thus allowable for the company as part of the cost of that person's remuneration package. 

Thanks (0)