I was recently invited to a formal professional body related black tie dinner. Whilst a social evening I was still representing my company. My company were supporting the event by donating raffle prizes etc. I was lucky to be a guest so my ticket was paid for. To returnt eh gesture I bought a round of drinks (not cheap at these posh hotels). In my mind this is a legitimate business expense. However, what would the taax man class it as and can it be reclaimed.
Similarly, as a new business, one of my clients has taken pity on my lack of Chrsit mas party this year and invited me (at no expense) to theirs. Clearly it would only be olite to contribute and I have said I will provide some table drinks for their staff. Would this be a legitimate expense? If not, could it be reclaimed as part of my own £150 Christmas party allowance which HMRC allow?
In my experience you can claim for alcoholic drinks as a business expense but you can not claim the VAT back. As long as consumption of this was within a setting of business, where you were promoting, or supporting an event that had links with your business or you were hosting an event itself. You can even take clients out as part of your networking business practice but VAT can not be claimed. As for the xmas do am not quite sure how that would effect you as that would more be classed as staff entertaining if you were having one yourself but if you are going to one it might not be classed as a business expense. Hope this helps.
I would considder whether or not it was worth bothering. You had a fee night out and bought a few drinks. If it was a business related event, by that I mean was it a meeting connected with your every day business activities or was it just a bit of a party. There are a lot of grey areas with this type of thing now. I wouldnt bother personally as I would see that I had received benefit from the invite in the first place. conferences and seminars are fine but parties no.
Thank you both for your replies. As a small business where the pennies matter it is certainly worth bothering with. Although I agree in future as the business grows it probably isn't. I can see why this would be a grey area so will make my own judgement call so that if I am challenged at a later daet I can justify why I made the expense claim. For my 2 scenarios above, given your feedback, I personally would consider one of them a genuine business expense and the other a party.
I would suggest the first scenario would be considered as entertaining. Youi cannot claim the vat and although you can show the gross cost in your accounts it will then be added back to your profit as it is not tax deductible.
Are you the only employee of the company? The annual 3150 allowance is claimable but all employees are must be invited. If that's just you, I would say buy those drinks as part of the 'staff party' and claim it. Don't go over the £150 otherwise the whole amount becomes a P11 taxable benefit in kind.
