Family run haulage business with 20 employees including the two adult children of the husband & wife directors.
The four family members are the company's only admin staff. All the other employees are drivers and mechanics. The children still live at home with their parents.
The four family members went out for an expensive meal at a top hotel and are claiming this was solely for the purpose of holding a strategic management meeting away from the office premises to ensure privacy in discussing the future management of the business. The company has had a very sucessful year and the parents chose the venue to reflect the success of the past year and as a suitable venue at which to announce significant financial bonuses for the children.
Can the cost of this meal be claimed as a tax deductible business expense and the VAT reclaimed ?
Replies (29)
Please login or register to join the discussion.
From the way you have described it there is at least a duality of purpose therefore its not 'wholly and exclusively' incurred so not deductible for corporation tax. I leave others to comment on VAT
For balance, I will differ. I'm looking at s1299 CTA 2009 and thinking this acts to prevent a disallowance.
But there's a taxable BIK.
It's deductible with a BIK, but you can't recover the VAT, simply because different taxes work differently.
You have a way with words :-)
Replace ", simply because" with ";" and we agree completely.
I would suggest your client knows they are taking the pee.
You don't end up running a haulage business of that size by being a shrinking violet.
Stand up to them, they will respect you for it, and keep pushing/bullying you if you don't.
Come off it, its not a BIK question.
its a "can I have this for free on the company" question.
To which the answer is "no, it would be BIK, so rather pointless claiming"
Rather pointless claiming? Too late, the company has already paid - though the mechanism whereby that happened is to be clarified.
I've reread the question.
It's implicit (though not stated) that the company has borne the cost. How did that circumstance come about?
However you could mention that had they invited their friendly accountant to the lavish very necessary meeting, ideally out of town, then ........
then.... if s/he'd had the most expensive meal, they could have argued that s1299 did not apply? Why would they do that?!
Anyway it turns out this was all just fantasy (caught in a landslide, no escape from reality, open your eyes, look up to the skies and see....) ...the company simply lent the funds to pay for the meal, it didn't (as we first thought) pay for the meal itself.
I don't know why you would DCA it. It sounds like a perfectly proper expense of the business. It just gives rise to BIKs for the four individuals. Divided by 4 it may be a trivial benefit though, dependent on your particular view of what an expensive meal is.
...dependent on your particular view of what an expensive meal is.
And your interpretation of the trivial benefit rules. (And indeed whose DLA we are talking about... just the two parents?)
I agree that folk in here seem to reach for DCA/DLA too readily. I think that's part of the landslide effect.
Staff entertaining so allowable as a tax deduction and they can reclaim the VAT. BIK per above or set up a PAYE SA for company to bear the cost.
You can't reclaim the VAT because it's the proprietors and their family. See https://www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit43600 Make sure you get as far as the paragraph about directors/proprietors.
In an argument. It's questionable whether it would convince a tribunal, mind, but it's an argument.
I've decided I now agree completely with chicken farmer vis-à-vis the VAT.
I'm surprised that you are so ready to accept HMRC's guidance. In any event, though, the paragraph cited makes no mention of members of directors' family. Secondly, it does not block input VAT on meals etc on business trips. Whether this could be considered a business 'trip' I'm not sure but it is certainly debatable.
In practice HMRC will accept their own guidance, and I know from experience that this is how they will seek to apply it in this sort of situation. And it would have to be a really expensive meal for it to be worthwhile arguing the toss; I mean debating the issue.
"In practice HMRC will accept their own guidance". Unless, as has been proven to be the case, it doesn't suit their argument.
But I agree that one needs to consider the commerciality of arguing the matter.
What exactly is leading people to disallow this? Have we forgotten that the purported purpose was strategy discussion?
Is it the lavish nature of the occasion?
Is it the fact that it's the attendees are all related (notwithstanding that they are the senior staff of the company)?
How would you treat the costs of an offsite meeting at a plush venue for the directors of Megacorp plc? Or the costs of a sales conference for the sales team? Or for that matter an annual professional event?
Assuming that the cost per head was less than £150, would it make a difference if there was another (cheaper) event for other staff - in effect making the events into the Christmas party?
I saw recently on social media that one of the app companies took all 50 of its staff to Bali for a week for some sort of team brainstorming / mastermind session or whatever these software types call it.
I wonder how they square that away with HMRC (and their investors).
PSA with HMRC, unless they manage to push it through the work-related training exemption, which isn't outside the realms of possibility.
Entry level, free commentary is provided here: https://www.gov.uk/expenses-benefits-social-functions-parties/whats-exempt (fortunately for me I didn't see a mention of VAT so I don't feel like I'm in breach of undertaking in sharing this).
Some folk don't like the publisher, but you'd be foolhardy to ignore the views expressed completely. And the points made are easy enough to look up in legislation.
The same publisher provides much more detailed (and generally better) commentary, also for free, for those prepared to look a bit harder.