Staff and Client Entertainment Expenses: What Can You Claim?
In the world of business, fostering strong relationships with both staff and clients is essential for success.
This often involves hosting events or engaging in activities that promote networking and goodwill.
However, when it comes to the expenses incurred for staff and client entertainment, it’s important for UK-based businesses to understand what can be claimed as allowable expenses.
In this blog post, we will explore the guidelines and regulations surrounding staff and client entertainment expenses in the UK, helping you navigate the complexities of claiming expenses while staying compliant.
1. Entertainment Expenses for Staff:
When it comes to staff entertainment expenses, it’s crucial to distinguish between what is considered a legitimate business expense and what is not. The following points outline what you can claim:
a) Staff Parties and Social Events:
In the UK, businesses can claim tax relief for staff parties and social events as long as they meet certain criteria. The event must be open to all employees and have an overall cost of £150 per person or less. Additionally, the event must not be a reward for specific individuals or connected to any contract of employment.
b) Team-Building Activities:
Expenses incurred for team-building activities, such as retreats or off-site training, can be claimed as long as they are directly related to the business and benefit the staff as a whole. However, extravagant or excessive expenses may raise questions from HM Revenue and Customs (HMRC).
2. Entertainment Expenses for Clients:
Building and maintaining good relationships with clients often involves hosting meetings or events. Here are the key points to consider regarding client entertainment expenses:
a) Business Entertainment:
Expenses incurred for entertaining clients can be claimed if they are directly related to the business or trade. This includes meals, drinks, and other entertainment expenses incurred during client meetings or discussions. However, it’s crucial to keep detailed records and receipts to substantiate these expenses in case of an HMRC audit.
b) Reasonable and Proportionate:
The entertainment expenses claimed should be reasonable and proportionate to the nature of the business and the client relationship. Excessive or extravagant expenses may not be viewed favorably by the HMRC and could be challenged.
3. Restrictions and Non-Claimable Expenses:
While certain entertainment expenses can be claimed, there are restrictions and non-claimable expenses to be aware of:
a) Subsistence Expenses:
Regular staff meals or everyday business-related meals are generally not claimable. Expenses incurred for meals during normal working hours or as part of the employment contract are not eligible for tax relief.
b) Non-Business Entertainment:
Expenses incurred for non-business-related entertainment, such as personal meals or recreational activities, are not claimable.
c) Event Hospitality:
Expenses incurred for event hospitality, such as tickets to concerts or sporting events, are typically not allowable unless they are directly related to the business and have a clear business purpose.
Understanding the rules and regulations surrounding staff and client entertainment expenses is crucial for UK-based businesses to ensure compliance and avoid any unnecessary tax issues.
By following the guidelines outlined by HMRC, businesses can make legitimate claims for allowable expenses while nurturing relationships with staff and clients. Remember to keep detailed records, receipts, and supporting documentation for all entertainment expenses claimed.
If in doubt, it is always recommended to seek professional advice from a qualified accountant or tax advisor to ensure compliance with the latest regulations, like us!
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