A client is considering purchasing a corporate package for 2 tickets to watch Everton (so shouldn't be classed as entertainment)
This will cost 2 x £1500 + vat.
It is likely the director will use one seat and take either customers, employees or possibly family with him.
What are the vat, BIK and CT implications please?
I am not being lazy; I am reseaching myself but perhaps one of you good people have come across this before.
Replies (6)
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Why not classed as entertainment ?
Why do you say it should not be classed as entertainment? - I know very little about football teams so can't judge whether this particular team are boring or not!
My understanding is that this would precisely be classed as entertaining for the purposes of taxation and therefore, I would never permit this type of expenses to come into contact with the business records.
If the client insists on paying for this treat out of the business funds, I would treat them as drawings and not try to claim anything business-wise - "wholly & exclusively for the purposes of trade".
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IF THE DIRECTOR TAKES A CLIENT.....
VAT - The input VAT is not recoverable as it will be classed as business entertainment
CT - The cost is not deductible as it is classed as client entertaining
BIK - No implications, the director is performing the duties of employment by entertaining a client, so there is no benefit in kind
IF THE DIRECTOR TAKES AN EMPLOYEE.....
VAT - Arguably the input VAT is fully recoverable as employee entertainment
CT - An allowable expense because it is classed as employee entertaining
BIK - A taxable benefit in kind for both the employee and the director (assuming the tax is not settled via a PAYE settlement agreement)
IF THE DIRECTOR TAKES FAMILY.....
VAT - This is not input tax as it is not incurred for the business. Not recoverable
CT - An allowable expense because it will be considered part of the director's remuneration
BIK - Full value of the tickets taxable as a benefit in kind on the director
Everton!
The reason he says it not entertaiment is because the inset photo is of the great Bil Shankly!!!
Doesn't have to be a client...
The business entertaining rules above apply to all business entertaining that isn't just for employees (so it could be suppliers, potential clients, the bank manager and other business contacts)
Depends
If the director is going to the match in order to entertain his client, then that is a legitimate business activity and no BIK arises. I think you have a strong case for this, if a client is brought along with the director. It doesn't matter how much he (or she) enjoys it!
If the director is going purely for entertainment purposes and only coincidentally invites a client, then I agree a BIK would arise. I am struggling to understand why anyone would opt for this scenario over the one described above!