Staff and client entertaining: the tax difference
Explaining when something is and is not tax-deductible
The same dinner can have opposite tax treatment depending on who is sitting at the table.
Staff entertaining
Entertaining your employees (including yourself as a director) is a deductible cost for Corporation Tax. On top of that, annual events such as a Christmas party or summer social are tax free for the staff attending, provided the combined cost of all annual events stays within £150 per head including VAT. Go over and the whole amount becomes a taxable benefit.
Client entertaining
Entertaining customers, suppliers or prospects is never deductible for Corporation Tax and its VAT cannot be reclaimed. The company can still pay; we simply add the cost back in the tax calculation.
💡 Good to know: For mixed events, the cost is split by headcount between staff and clients. Keep the guest list with the receipt and we will code it correctly.
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