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Where Taxpayers and Advisers Meet

Complimentary hospitality services

The Cyclist
Joined:Sat Sep 25, 2021 7:50 pm
Complimentary hospitality services

Postby The Cyclist » Sat Sep 25, 2021 8:04 pm

Company runs an outdoor sports adventure park (mountain biking, hiking etc) and regularly provides free entry to tour operators for marketing and promotional purposes - including an annual trade day attended by up to 50 tour operators.

Other than food and drink - on which input VAT recovery is blocked - there are no other bought-in costs relating to these free admissions, which typically account for 4% of all admissions during any given year.

Could HMRC argue though input VAT on 4% of total overheads should be blocked on the basis that the free entry falls under the business entertainment rules? Or could it be argued that it's allowable marketing/advertising expenditure?

Alternatively, could HMRC argue that the free entries are non-business, and seek an input VAT restriction from that angle?

Joined:Wed Aug 06, 2008 3:09 pm

Re: Complimentary hospitality services

Postby les35 » Mon Sep 27, 2021 3:56 pm

You raise an interesting point!
- is this a non-business activity? I think no, since you are marketing your services and presumably intend that the recipients purchase from you.
- is it simply your business model? You are providing free entry so that the tour operators will become your customers. But that does not prevent the business entertainment rules form applying!
- is this business entertainment, and so is input tax blocked? I fear so.
But I would resist any restriction on overhead input tax. The only non-deductible input tax is 4% of directly related costs.

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