Can you claim vat on hospitality

This is great news for the hospitality sector as it reopens to the public albeit with reduced capacity. However, as with most legislative changes which are introduced quickly, this has resulted in many questions and areas requiring clarification. HMRC has now provided updated guidance for food , catering as well as the law introducing three new groups to the reduced rate. BDO has since discussed a number of points of uncertainty with HMRC and has established a number of important clarifications as explained below.

This leads on to a number of questions, the answers to which are not always easily apparent and getting it wrong may prove costly. Some examples of supplies in the course of catering noted by HMRC include:. The last point may surprise many but HMRC has confirmed that room service is classified as off-premises catering and therefore does not qualify for the reduced rate. That logic can raise issues as to how takeaways in general which are delivered should be treated.

However delivered in addition to collected takeaways do qualify for the reduced rate, unless other services are provided in addition to the food, in which case this could be standard-rated for example, a restaurant providing a cooking service to prepare meals for a dinner party. Defining what is off-premises catering as opposed to a takeaway or delivered food has been a niche issue in the past typically reserved for suppliers delivering cold food but these temporary changes expands the issue.

Cases such as Value Catering Limited provided some points to consider to determine if a supply is a catering service or a supply of food including but not limited to ;. The increasing use of the gig economy for food delivery also raises questions about the VAT liability of charges associated with delivery services provided by a third party.

To avoid this the employer could opt to make a voluntary disclosure to HMRC or a more popular option is to keep within the boundaries of the Annual Party Exemption. To benefit from this, the event s must be open to all employees. However, if this entertainment occurs when those directors are away from their usual place of work, such as on a business trip, then VAT paid on the costs of travel, meals and accommodation can be reclaimed. This means that if a director-only meal took place during a business trip — and, crucially, one that they would have taken anyway — tax relief is possible.

The rules around staff and client entertaining are complex but there are ways to make this expenditure more tax efficient. How to Build Your Accountancy Team. Hospitality VAT rate set to rise to How to Register as a Sole Trader.

What actually counts as an entertainment expense? Client entertainment Client or business entertaining covers expense occurred when hosting existing clients, potential clients or anyone else who is not an employee. Tax relief on client entertaining One key thing to remember is that when taking clients out, always pay through the business rather than through personal accounts.

Reclaiming VAT on overseas business entertaining On the whole, VAT cannot be reclaimed when it comes to client entertaining, unless you are entertaining overseas customers. Staff entertainment When it comes to staff entertaining, the first thing to be clear about is what actually constitutes an employee in the eyes of HMRC. Entertaining employees as a reward or to boost company morale is allowable for tax relief through reclaiming any VAT you pay. The purpose of the event needs to be to entertain employees in order to be able to claim tax relief or VAT on business entertainment deductions.

Related: VAT in the food industry. However, when partners and directors attend staff events with employees, you can reclaim the VAT on business entertainment as covered above. Your company can pay for entertaining clients or potential clients, but this will not be an allowable deduction for Corporation Tax purposes.

It makes no difference if the person being entertained is an existing customer, a potential customer, or any other person who is not an employee. The VAT element of entertaining can only be claimed when it relates to staff, as detailed above. Which leads to a further word of caution — if a staff member is acting as a host, and the purpose of the cost was to entertain the client, then no VAT on corporate entertainment can be reclaimed at all.

An overseas customer is considered to be any customer not usually resident or carrying on business in the UK. Keep in mind that you can only reclaim VAT for costs related to entertaining overseas customers and not overseas suppliers or business contracts. You run a door fitting company and your business model runs heavily-reliant on being referred clients by contractors. In your mind, the best marketing strategy for your business is to butter-up these contractors so they recommend your door fitting service to whoever they are building for at that point in time.

Instead of wining and dining the contractors, organise a marketing event in a venue. Corporate boxes are tricky as the treatment of them varies depending on how they are used and who uses them.

What are the VAT, benefit-in-kind and corporation tax implications should the director of the company take with them i a client, or ii an employee? Where benefit-in-kind is concerned, there are no implications in this case. The director is performing the duties of employment by entertaining a client.

However, there is a taxable benefit in kind for both the employee and the director, assuming the tax is not settled via a PAYE settlement agreement.