Corporate Entertaining

[jkc]

Recently there have been a number of occassions were we have taken prospective clients out for lunch / dinner at various local venues. The cost of which were paid for using a company credit card.

What level of expenses would be deemed acceptable and what information regarding the meetings are we required to keep.

Thanks

[cranleys]

Jkc

Entertaining is and always has been non-allowable for tax purposes.

Anything may be acceptable to your company but none will be acceptable to the tax inspector!

Always available to assist.

Colin Davison
colin.davison@cranleys.co.uk

Making tax simple for all

Cranleys Chartered Accountants
01256-766655
07766-714000

[Lambs]

JKC, as you will see from the above, your company will not normally be able to claim a deduction in its accounts, but I should perhaps also add that you (the employees in attendance) are also potentially assessable to "benefits in kind" on the relevant cost of the entertaining, for personal income tax purposes...perhaps you are already familiar with forms P11D?

The following booklet sets out the Revenue guidance on benefits in kind:
http://www.inlandrevenue.gov.uk/guidance/480.pdf
and section 20 deals with entertaining.

As with all expenses, you should keep all receipts, card slips, etc; no doubt the mileage logs or diaries which you keep will provide further details of the relevant client or potential client, and the matters for discussion.

You should also be aware that you can bypass much of the annual problem of P11D preparation, by obtaining a relevant dispensation from the Inland Revenue. If the Inspector is satisfied that your records as outlined above are maintained and relevant controls are in place, then you will not have to prepare the forms themeselves - at least insofar as those expenses for which you have a dispensation are concerned.

[nmkpidelta]

Lambs, Is the dispensation obtained by the employer or an indvidual employee can also apply to IRS. Also are there some references for dispensation levels and limits, especially in 'working from home' scenario.

[Lambs]

NM, a dispensation allows the employer to dispense with the formality of preparing P11Ds, insofar as the expenses covered in the dispensation are concerned. It is the employer's responsibility to prepare forms P11D in the first place, so it is the employer who will apply for a dispensation.

I think perhaps you misunderstand the manner in which a dispensation is granted, and works. A dispensation doesn't normally act so as to allow you not to report small amounts falling below a set limit; rather, a dispensation is granted where the Inspector of Taxes is satisfied that the expenditure laid out by the company in respect of an employee, has effectively been incurred for business purposes, so the entry on the P11D would be covered by a corresponding claim by the individual.

Consider where an employee pays for the hotel bill on a business trip. He then makes an expenses claim from his employer, who, once satisfied that it's a legitimate business expense, reimburses the cost to the employee.

Normally, the employer has then to fill in a form P11D for that employee each year, summarising expenses such as those above. The employee then makes a separate individual claim that the reimbursement was incurred wholly, necessarily and exclusively for the purposes of his employment, otherwise he may be taxed on the 'benefits' shown on the P11D form.

Many of the expenses which end up on an employee's P11D are straight forward business expenses, and will be negated by an individual claim. Further, many P11Ds themselves will hold only such items, and not any truly taxable benefits, so the form is a waste of time for the employer, employee, and the Inland Revenue as well, when this happens.

The point of a dispensation is to reduce or eliminate the number of P11Ds which the employer is required to prepare and submit, by reducing the types of items which the employer needs to report. The Inspector will grant a dispensation where satisfied that the types of expenditure for which an application has been made, are such that they aren't going to end up being taxable in the hands of the employee, and that the internal controls of the employer's book-keeping systems are such that the expenses covered are accurately recorded, and unlikely to be abused.

Hope this helps.

Lambs