In particular they held a party at a local restaurant and invited 50 of their most loyal customers and suppliers. All of these customers are based in the UK. In addition this client also paid for the two directors plus 6 employees also to attend.
An amount of £6,000 plus VAT £1,200 was incurred. Can the fully taxable VAT registered client reclaim the VAT incurred on this cost?
A: Although the cost of entertaining “staff” to reward them for their hard work is allowable as a VATable business expense, when the staff concerned are acting as hosts to non-employees (as appears to be the case here given the headcounts involved), this would be seen as business entertainment.
There is an input tax block that will apply to the reclaiming of input tax in connection with entertaining UK businesses so (per chapter 2 of Notice 700/65) none of the VAT incurred would be claimable.
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