Can you Claim Expenses Taking a Client Out?

  • by Jarrell Marley
  • 3 Months ago
  • Comments Off

Entertaining new or prospective clients is definitely a good way to keep them warm, and to build a long lasting relationship with them.  They tend to appreciate the extra effort you have made – and this can go a long way.  You will no doubt want to take them somewhere nice, but you won’t want to be left with the hefty bill at the end of dinner!

If you are based in or near central London – you will know that it might be difficult to get a nice meal out that doesn’t cost a fortune – but there are some sites such as Groupon, lastminute.com that may be able to provide you with some less expensive options.  You still need to worry about the taxi home though!

What Exactly Can you Claim Expenses for?

It depends is the answer.  Limited companies for example can’t claim for entertaining clients due to corporation tax reasons.  To explain, this means that the bill can be claimed as a legitimate expense (assuming it is solely for business purposes) – it can’t be deducted from your personal tax return when establishing how much the company owes.

Sole traders also face the same issue.  Entertaining clients isn’t an allowable expense here either.  This means that your business can pay the bill – the cost isn’t deductable when you are working out your income tax and NI payments.  It is still however more tax efficient than simply paying the bill completely out of your own pocket.

What is Benefit in Kind?

HMRC is of course viewed as the monster in any tax situation.  If they feel that the meal was a sociable one rather than for business reasons – they may decide it is a “benefit in kind” you could end up personally responsible for the tax and NI.  It’s always a good idea to keep any receipts that you accumulate so there is an accurate record should HMRC decide to investigate.  If there are entertainment costs that appear to be disproportionate – this could in fact trigger an investigation.  It’s also important to note that if you are VAT registered, you can’t claim that back in these circumstances.

Is Gift Giving the Same Thing?

You may want to send your client a gift for their birthday or Christmas.  It’s a nice gesture to let them know that you are thinking of them.  If you want this to be regarded as a tax deductable expense – you can’t purchase anything over £50 – and it also needs to be promotional in its nature.  You can’t give them gifts such as alcohol, vouchers, food etc unless it is your product – this won’t be counted.  If the gift value is over the £50 mark – HMRC could disallow the full amount.  As with anything regarding financial related – make sure you get advice from your accountants central London based who will have experience in these matters and also have an idea about London prices!

Image: Pixabay

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