In the new era of hybrid working many business leaders and management teams are looking for ideas to help keep their teams motivated, and stay connected.
Team lunches are a common go-to idea for managers who want to achieve their team building goals. A regular question posed to accountants is whether these staff entertainment costs can be expensed by their businesses.
Entertaining your team is an allowable expense for VAT recovery. This is only if it is ‘wholly and exclusively’ for the purpose of business. It’s a great way to reward them for good work or boosting morale. There are, however, exceptions to this rule.
Exclusions apply
On the gov.uk website it states costs are not allowable in entertaining if it is for the following:
- entertainment is provided exclusively to directors, partners or sole proprietors of the business,
- employees act as hosts to non-employees (special rules apply to overseas customers).
If directors join a team lunch or other employee-only entertainment together with other types of employees, then the expense is allowable.
For the purpose of business entertainment employees include:
- Payroll staff
- Directors – anyone who manages the business (including partners)
- Self employed persons (subsistence expenses only)
- Helpers, stewards and other people.
Employee entertainment does not include employee and director’s subsistence.
Businesses should be cautious on the amount of money they spend on entertaining staff members. There are limits to how much employees can receive before it becomes a benefit in kind, and therefore becomes a personal tax for them.
Your business might decide to host one or more annual events for your payroll staff, and it is important to remember the maximum spend per tax year before employees incur personal tax implications is £150 per person (including VAT).
Bring a guest
You can not claim the VAT on costs when an employee is permitted to bring guests to an event.
If you are interested in finding out more information for SMEs see a wide range of resources and insight found on the Resources section of our website. For support with all your outsourced accounting services and part time CFO services please get in touch, call 0118 911 3777 or email info@teamsas.co.uk.
Use of this information is for reference only. Specialist Accounting Solutions Ltd accepts no liability for any errors therein or any losses or damages arising from it.
