Staff entertainment overseas office

PSA or not?

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One of our staff has taken out a new employee from our overseas office (EU) for lunch dinner etc.. and as employer cost was reimbused to the employee. The purpose was employee induction.   Does this need to be reported on PSA?  

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By paul.benny
12th Aug 2020 16:35

For the overseas employee, this seems like subsistence- and in any case they are not within scope of UK PAYE.

If the purpose is genuinely induction, I think it can be argued that Section 336 ITEPA 2003 can be applied and therefore the expense treated as allowable. See EIM 31630; you will need to consider against the precise facts of your case.

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Replying to paul.benny:
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By sotour
13th Aug 2020 13:11

paul.benny wrote:

For the overseas employee, this seems like subsistence- and in any case they are not within scope of UK PAYE.

If the purpose is genuinely induction, I think it can be argued that Section 336 ITEPA 2003 can be applied and therefore the expense treated as allowable. See EIM 31630; you will need to consider against the precise facts of your case.

Thank you Paul am slightly confused with the rules. Just to expand on my original post. Our UK employee took EU employee (not on UK payroll) out for Lunch & Dinner followed by tour on the London Eye. I can see the cost of providing staff entertainment are fully tax deductible by the company and probably VAT can be recovered for social time as a reward/ team building exercise. What about the PSA ? Do we have to settle the tax and NI ?

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By Munch
13th Aug 2020 11:16

What a nightmare cross border costs are within a group. Entertaining an overseas group employee will be classed as business entertainment in my view and is not deductible for CT neither is the VAT recoverable.
Ideally the overseas employee should claim their own costs as subsistence and deal with the UK VAT from the overseas company. The reality is that this is a pain....who goes dutch in a business meal. As it is a business expense it is not a matter for a PSA or P11d and has no NIC impact. Having a clear group expense management policy is quite a job but it is best to get one in place.

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