I have clients who have monthly meetings at 3 locations which are attended by clients as part of their everyday business. They hold the meetings in hotels and the hotels charge them a flat rate of at least £100 for the use of the room. If it was that straight forward, I'd be fine. But, they can make up to the £100 by buying drinks (alcoholic included) and food. Basically, the hotel don't mind how the £100 is reached. The invoice displays Dinner Drinks, Dinner Wine, because it's a hotel and drinks are just added to the tab.
My main question and I hope I've not confused things with the description above is - Is this classed as Entertainment so no VAT is reclaimable or as it's part of their income can I reclaim all or some of the VAT?
If they spend £100 on drinks and food at a jolly then they get the room that they have the jolly in for free... Think of yourself sitting accross the desk from an HMRC inspector explaining that and I feel that you already have your answer.
If this was payment for the room and "refreshments" were provided free then provided that the reason for the meeting had legitimate business reasoning then the room hire would be allowable.
However, entertaining clients is this manner is not an allowable expense for VAT purposes.
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The invoice we get has drinks up to whatever amount they total and then if there is a balance to get to the £100, this is put to room hire. It's not a jolly at all - legitimate business meeting as part of the client's income. I think I'll play safe and do 50% reclaimable VAT.
The first thing I'd want to know would be how many were present at each meeting. The more there are, the less likely £100 on drinks is the primary objective.
From the hotels point of view for a second: in a down-turn, meeting rooms are probably not a scarce resource, so the room is just a teaser to get the punters in and maximise the amount of drinks sold. This doesn't mean to say drinking is the purpose of the meetings, but it would help if there had been meetings where the drinks cost extra after room hire.
Just my opinion but if you claim half the VAT, you're admitting there is some entertainment element so the extent is then open to argument.
For the few percentages difference when forgoing all the VAT, and setting off the expense against CT; I would rather there was only one set of bureaucrats watching over my shoulder.
The business takes out the same clients every month in an attempt to lubricate their wallets and expects HMRC to accept such bribery of clients as a legitimate expense as the business believes that it would not get the sales on the merits of its products alone.
I'm not seeing it.
The way I always think of these situations as hinted at above is imagining myself sitting down opposit an inspector attempting to explain the expenditure to them. If I don't believe that I'm going to come out of that conversation a winner then I don't really believe in the tax treatment of a given situation.
I'm totally with you in that I believe that you must either claim all of the VAT or non of it. To claim half is effectivly setting your own VAT rate of 10% for dubious calls.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Yes, we don't have the full facts but reading between the lines, I would want there to be a good reason for every one of those meetings no matter how it is billed.
I always think of my cousin who had a restaurant/bar and wanted to claim £50 every month (15+ years ago) for her hubby, the brewery rep. and the chef or someone to have 'business meetings'. A bit more transparent that one but it wold be nice to have some more facts just to see if our suspicions have grounds.
I can't remember the last time I claimed half vat for the reason given. My VAT listings just wouldn't shown anything that wasn't Zero, Exempt or Standard.
Eeek it's nearly afternoon already - I do find these questions interesting.
I was thinking about this at the weekend and there's another issue buried in the question.
How many clients are there at each meeting? The impression that I got was that these are quite small affairs.
This is entertainment rather than hire of the room. Imagine that there are four people at each meeting, 12 times a year. That's a minimum spend of £1200/4 is £300 which is a taxable benefit on the attendee's (except the person providing the entertainment) as it's more than the allowable £250 per year per source allowable.
Just one more thing to watch there.
To resolve this the client either needs at least five people at each meeting, or to drop a couple of months, or to keep the expenditure below the amount for a free room, or to have different representatives from the firms at some of the meetings.
How HMRC prove who was at what meeting is another matter but I'm just thinking of the principle / letter of the law rather than the practicalities of application.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Guys, Sorry I hadn't seen your replies to this thread. There are between 15-25 people on average at each meeting and they're sort of classroom style meetings where they are delivering a topic to the attendees.
We've come quite a way with this but don't know what business context this is in. What does your client do?
Classroom with drinkies? It weren't like that when I were a lad. Joking aside, been to plenty of seminars with canapes and coffee but don't recall having a tipple. Also, the vast majority of these seminars provided cold food, which indicates wanting to incur as little irrecoverable VAT as possible.
The amounts are not excessive and the numbers change the BIK aspect, but you said at least £100 so theoretically, one or more attendees could still be on a jolly. I would still err with not claiming the VAT and Shaun's link confirms this treatment.
