Business Expenses Entertaining Clients

Where the costs are incurred for the sole purpose of entertaining a non-employee the tax is input tax but is blocked under the business entertainment rules see. However as is often the case the rules are complicated and there are some.

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If youve decided to allocate a section of your marketing budget to entertaining clients this year you may be wondering whether you can claim back business entertainment expenses.

Business expenses entertaining clients. As an employer covering the costs of your employees providing entertainment for clients you have certain tax National Insurance and reporting obligations. Disallowable is a state of mind. Non-business entertainment of clients eg.

Entertainment solely for partners or directors. Meals or entertainment for which the taxpayer fails to show a clear business connection are deemed personal nondeductible expenses. The effect of something being disallowable is that the cost does not count towards reducing your taxable profits.

Frustratingly for small business owners the tax rules around wining and dining clients are not black and white. The cost of the meal or beverages isnt lavish or extravagant The meal is with a business contact like a customer employee vendor or consultant. The short answer is that the cost of business entertaining isnt tax deductible and you cant recover VAT on expenditure.

The cost of entertaining staff as a reward for good work or to keep up morale is classed as employee entertainment for which you can both claim tax relief and reclaim any VAT you pay. VAT on business entertainment explained. When you pay for your clients food drink or recreation in the context of meetings business lunches and social functions you are likely to incur what the ATO calls entertainment expenses which are not tax deductible.

Business meals or entertainment activities can occur before during or after the related business event ie business meeting discussion negotiation etc. The business owner or employee is present. Entertaining a business acquaintance for social reasons An example of an entertaining expense that would qualify for business purposes would be meeting a client or potential new client at a local chain restaurant for a relatively inexpensive lunch to discuss a potential upcoming contract.

The meal has an ordinary and necessary business. Entertaining Clients Meals include food or beverages including beverages or drinks served apart from meals of the taxpayer and his business associates at a cocktail lounge or hotel bar not involving distracting influences such as a floor show Re. Qualifying for Meal Expense Deductions.

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