Tea coffee etc for non staff (e.g. visitors/customer etc)

by **taxed** on Thu Apr 14, 2011 4:27 pm

I know that hopitality/entertainment is disallowed. However, when tea/coffee and (heaven forbid!) even biscuits are provided, is this deductibe for income tax (and VAT where the cost includes VAT)? If so, what is the reference please.

I expect a meal provided is clearly not deductible (unless it is being recharged as part of the overall service we provide), but to disallow tea etc seems a bit over the top.

by **section 44** on Thu Apr 14, 2011 5:03 pm

Sounds like

taxed wrote:hopitality/entertainment

?

by **taxed** on Thu Apr 14, 2011 5:17 pm

Thanks for the response, but I doubt in practice most companies strip out tea/coffee provided to visitors and disallow it?

I was hoping there was a concession or HMRC statement that took a sensible view on this.

by **section 44** on Thu Apr 14, 2011 5:35 pm

Subject to an exception, it's hospitality. It depends on whether it is the norm (e.g. a cup of coffee while you wait at the hairdressers). Section 1299(2) CTA 2009

by **AvocadoK** on Thu Apr 14, 2011 6:40 pm

If the purpose of providing refreshments is to facilitate the smooth running of a meeting, its purpose is not hospitality, so VAT is claimable. This has been decided in an ECJ case (for VAT).
AK

by **taxed** on Thu Apr 14, 2011 6:50 pm

AK,

I believe you are referring to this http://www.hmrc.gov.uk/briefs/vat/brief4410.htm which applies only to entertainment of overseas customers?

by **AvocadoK** on Thu Apr 14, 2011 6:56 pm

Taxed,
The HMRC guidance is misleading where it suggests that this treatment is only available to overseas customers. The point is, facilitating a business meeting is not hospitality at all.
AK

by **taxed** on Thu Apr 14, 2011 7:02 pm

AK,

Here is a quote from the link I gave:

"The block on recovering input tax on entertainment provided to anyone other than an overseas customer, for example, UK customers and non-UK business contacts who are not customers, remains effective and any VAT incurred on the costs of such entertainment cannot be recovered"

Seem fairly clear what their view is?

I take your point that anything that is not hospitality can be claimed, but I wouldn't want to have to argue tea/coffee (and maybe sandwiches) was necessary to the business at hand. If the business could have been conducted without these, which will usually be the case, then they are hospitality.

by **AvocadoK** on Thu Apr 14, 2011 7:16 pm

Their view on entertainment is indeed clear, but my point is that refreshments of the sort you refer to is not within the scope of this. If you have a meeting lasting several hours over the day, most people will not be able to function without being fed and watered. This is not hospitality - it's keeping the visitor in a fit state to participate in the meeting!

Tea & coffee and non choccy biscuits are zero rated of course, as are sandwiches unless supplied in the course of catering, so the point may be a bit academic!

AK

by **taxed** on Thu Apr 14, 2011 7:22 pm

AK,

Even for zero rated items, the point is still relevant for tax deduction.

I hear what you say, but would not want to be the test case arguing this with HMRC! When you visit
a supplier/customer and they offer you refreshments, I think most people would say they were being
nice (i.e. hospitable). There may be rare cases such as ones marathon meetings where it moved beyond
hospitality i.e. meeting would end if food/drink was not available.