HMRC has recently clarified its position on VAT recovery for entertainment expenses. Here are a few important points to keep in mind: 

• VAT on entertainment solely for directors/partners is usually not recoverable as VAT Input Tax 

• Subsistence Costs (meals, travel or accommodation) during business trips are recoverable 

• VAT on staff events including parties, team-building days, and outings is usually fully recoverable 

• VAT must be apportioned on mixed entertainment if both employees and non-employees (eg. guests) attend as it’s only possible to recover the portion related to employees 

• Entertainment – VAT on entertainment for non-employees is normally disallowed, unless they are an overseas client in which case input tax is not blocked. However, output tax could apply. 

Handling VAT on entertainment correctly can save your business money – and reduce the risk of HMRC challenges. 

📞 If you’d like us to review your business’s entertainment expenses or check that your VAT is being reclaimed properly, please do get in touch with us.