There are very few things in life more confusing than HMRC’s approach to meals and entertainment. One is me having a conversation with my mother about how a smart meter works, and the other is explaining VAT at a dinner party. Both end with someone staring blankly and wondering if it’s too late to drink heavily.
Entertainment — The “Nice Try” Category
Clients, Prospects or Suppliers
- VAT: No. You can wine and dine them until the overdraft groans, but you’re footing the bill, VAT included.
- Tax Deduction: Also no. HMRC sees it as generosity, not necessity. If you thought otherwise, you’re confusing tax planning with wishful thinking.
Staff
- VAT: Recoverable for genuine staff events — the Christmas party, the odd BBQ, or that disastrous team-building exercise in a canoe.
- Tax Deduction: Allowable, but within limits. £150 per head for the party. Spend £151, and congratulations — you’ve just given everyone a taxable benefit along with the cheap prosecco.
Short Version
Clients → HMRC shrugs and pockets your VAT.
Staff → sometimes allowable, provided you don’t get carried away.
Subsistence — “Yes, Humans Must Eat”
Subsistence is just HMRC’s grim little way of saying: fine, you can eat while working away, but don’t enjoy it too much.
Sole traders / lone directors
-
Away from your base?
You can claim your meal. Coffee at the desk = your problem. Coffee 200 miles away = suddenly deductible. - VAT: Only with a proper VAT invoice. That napkin with “Greggs £3.50” scrawled in biro isn’t going to cut it.
- Tax Deduction: Deductible, because otherwise you’d pass out mid-meeting, and even HMRC knows that’s bad optics.
Employees
- Travel for business (not the daily commute) = claimable.
- VAT: Reclaimable with receipts.
- Tax Deduction: Deductible, assuming the receipts don’t read like a bar tab.
Spot the Difference
Entertainment → being generous to others. HMRC hates generosity.
Subsistence → keeping yourself alive long enough to generate taxable profits. HMRC tolerates this.
The Fun Police Say…
- Alcohol with food is fine. Alcohol instead of food, less so.
- Your daily coffee run isn’t subsistence. It’s an addiction, and HMRC doesn’t underwrite addictions (unless it’s theirs).
- Bigger companies need policies, otherwise everyone’s “subsistence” turns into Deliveroo on repeat.
Bottom Line
Feed yourself on business travel — tolerated. Feed your staff once or twice — tolerated. Feed your clients? That’s not tax deductible; that’s you funding their dinner while HMRC watches from the corner, amused.
