Input VAT incurred on the entertainment of employees, for example the provision of food, drink, accommodation or theatre/concert tickets is wholly recoverable if provided for the sole benefit of the businesses employees, for example as reward for good work or to maintain staff morale.
There are, however, two exceptions to this general rule in which input VAT recovery would be blocked. If entertainment is provided solely for the benefit of director or partners it is not deemed to have been provided for a business purpose and therefore any VAT incurred is not available for reclaim. Furthermore, any entertainment provided to non-employees, for example relatives of employees or clients/suppliers, cannot be defined as business entertainment for these purposes and therefore input VAT recovery is again blocked under the business entertainment rules.
When you’re looking to recover VAT on your office Christmas party, it is advantageous to familiarise yourself with these rules. If you are unsure whether entertainment paid for by the business can be recovered, please call us to discuss.