Many businesses will incur expenditure on entertaining clients and suppliers. The question that often arises is whether the VAT incurred can be claimed back.

The VAT guidance is set out in the Revenue & Customs leaflet 700/65. This states that you cannot claim back VAT on entertainment if it is provided free to non-employees and it is entertainment.

Entertainment is only loosely defined but would include meals out and trips to a cinema, theatre or sporting event. So if, for instance, you take a client to a football match and for a meal, you could not claim back the VAT on that expenditure.
What about an employee-only event?

You can generally claim back the VAT on these events. For instance, if you send your employees on a training day or a team-building day, you can normally claim the VAT back on that expenditure.

However, if the entertainment is provided only for directors, partners or sole proprietors of a business, you cannot claim back the VAT.

If employees act as hosts to customers, these costs are considered to be for the purpose of entertaining. The input tax cannot, therefore, be claimed back in these circumstances.
VAT on entertaining expenditure is both a complex and a vague area. If you would like further help and guidance, please do not hesitate to contact us here at Appletons Accountants.