It is best to arrange for your company to pay for these directly because, although this is a disallowable item for corporation tax, it is still more tax effective than paying for it personally if you are a higher rate tax payer IE if the corporation tax rate is 20%, you will in effect pay tax on these items at this rate, as opposed to paying tax @ 25% as a higher rate tax payer using dividend income used for the purchases (or even more with income from employment of course).
Business Entertainment relates to taking out a prospective client/client/supplier to lunch/dinner etc so still must be business related!
HMRC don’t like this sort of arrangement being tax deductible. “Hospitality of any kind” is the phrase that the courts come up with to back HMRC’s stance on the subject.
For this sort of cost to be tax deductible, a commercial transaction needs to take place – so for example if you invite potential clients to an event, provide them with light refreshments in exchange for them completing a questionnaire about what they are looking for in a supplier, then you are receiving something in exchange back for the company’s cost of the event. The more that is spent on the event, the more that HMRC won’t be keen to treat the expense as tax deductible.
Article from Graeme Bennett of Forbes Young.
Leave a Reply