Q – I am throwing a Christmas party for my staff and I am allowing the staff to bring a guest. I have incurred VAT on the hire of the venue, the catering and then entertainment. Can I claim this VAT?
A – Yes, but only the proportion of the VAT incurred that can be said to relate to the staff. The VAT incurred in regard to attendees that are not staff is restricted under the Business Entertainment rules. The VAT will therefore need to be apportioned accordingly.
However, there is an alternative which could be used to enable you claim all the VAT incurred on the party.
HMRC advises that entertainment is Business Entertainment when it is provided free of charge to anyone who is not an employee. Therefore, if you were to make a small admission charge to the non-employees then the entertainment would not be provided free of charge and thus would not be Business Entertainment.
Although you would be required to declare VAT on the admission charges, by charging for admission the VAT incurred in throwing the party would also be recoverable.