MrsNewb
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Tax implications of social event

Having prepared year end accounts for a client (who runs a company that hold outdoor group fitness sessions), they are not happy with their CT calculation due to treatment of income related to a social event (restaurant meal) for their clients. 

Basically they asked each of their clients who would like to attend to pre-pay the £30 fixed fee pp into their company account and then their company settled the bill directly with the restaurant on the night. Overall my client paid more than they received from prepayments because they paid for extras.

I have told them collecting prepayment was a bad idea as this income is taxable regardless of its purpose. And the expenses are not tax deductible as they relate to client entertaining. 

Would anyone here disagree?

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19th Jun 2017 19:34

You mean you are disallowing the gross payment to the restaurant, rather than the net cost?

If so, I agree with your client.

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By MrsNewb
to johngroganjga
19th Jun 2017 20:13

Could you explain your reasoning?

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By Ruddles
to MrsNewb
19th Jun 2017 20:39

Let's start with the basics, shall we? Why do you think that the receipts are taxable?

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to MrsNewb
19th Jun 2017 21:32

You should only add back the entertaining cost that your client has borne, not the cost that they have not borne because the recipients of the entertaining have borne it themselves.

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By Ruddles
19th Jun 2017 19:47

I would disagree (with the OP)

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19th Jun 2017 20:53

Frightening.

Mind you, the idea of an entertaining event that customers pay for is odd from the start.

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By Ruddles
to Accountant A
19th Jun 2017 21:20

Not really (the 'odd' bit, that is - I agree on the 'frightening'). I have a number of clients that organise annual events, golf days etc for their customers to which they receive a contribution.

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By MJShone
20th Jun 2017 09:27

This is not uncommon. I agree with all the other answers so far - it's only the net cost to your client that's disallowable - unless there was such a tenuous link between the £30 coming in and the entertaining. (You couldn't, for example, say that what your client's customers paid for an outdoor fitness session went towards the entertaining.) It seems, from your post, that the £30 was a direct payment for the restaurant meal. If you want the Revenue's view, which doesn't disagree with everyone's replies to you so far, see BIM45013 as an indication.

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By Ruddles
to MJShone
20th Jun 2017 09:40

I think the example at the foot of BIM45012 is more helpful in this case.

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By MJShone
to Ruddles
20th Jun 2017 09:59

Agreed Ruddles!

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By nrw
21st Jun 2017 13:27

Do costs passed on to third parties not constitute disbursements?

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