Many businesses will have held Christmas parties and lunches for their staff and clients in the weeks leading up to Christmas. Some businesses will have given gifts. They will now want to know whether they can recover the VAT that they incurred on this expenditure. The following information is meant to act as a guide for those businesses that can generally recover all of the VAT they incur.
- VAT can usually be reclaimed on entertaining employees as long as all staff are invited
- Making a small charge to guests can secure VAT recovery when it wouldn’t otherwise be available.
- Business gifts may be given VAT-free up to a £50 annual limit for each recipient
Christmas lunches and parties.
When only staff are invited to a party or lunch, then full VAT recovery is available. If customers or suppliers are also invited, this recovery is lost if the staff are expected to act as hosts. If staff partners, customers or suppliers are invited, VAT recovery is not possible if they do not have to cover any of their costs. However, if a token charge of say £5 per head is made to guests, they are no longer viewed by HMRC as being “entertained” and full VAT recovery is therefore available. Output tax would need to be accounted for out on the charges made on a VAT inclusive basis.
If an individual is given gifts that cost the giver less than £50 excluding VAT they can be given away VAT free. This £50 figure is an annual limit, so it’s important that value of gifts to the same customer or member of staff annually is monitored. VAT can be recovered on the cost of the gift providing a tax invoice is obtained.
Should you have any queries with regard to the above, please contact Gill Yates either by email, email@example.com or on 0845 177 0000