As a director of your limited company you can claim reimbursement of certain business Entertaining Expenses from your company. They must have been necessarily incurred in the performance of your duties as a director. Entertaining includes hospitality of any kind and expenditure on business gifts. It does not include free samples of your own products distributed with the aim of advertising to the general public or gifts of food, drink, tobacco, or vouchers exchangeable for goods. It is subject to the condition that the cost to you of the gifts does not exceed £50 a year in the case of any one recipient.
With certain exceptions, expenditure on business entertainment or gifts is not allowable as a deduction against profits, even if it is a genuine expense of your trade or business. Tax relief is not therefore available. If you have incurred the cost of business entertaining personally you may be able to claim the expense as being incurred in the performance of your duties. These costs would be disallowed in the company profits, so the net effect would be the same as not claiming the expenses in the first place.
Training courses and seminars provided to customers
The cost of food and accommodation provided for directors arranging training courses for the purpose of the trade is an allowable expense. If food and accommodation provided as part of training are given to any other person free of charge, the cost is classed as entertainment and is therefore disallowable.
Your limited company may provide training for individuals not connected to it. Although the training itself, such as the cost of speakers or hire of a room, is an allowable expense, but any food or overnight accommodation provided for the attendees is a disallowable entertaining expense.
You can hold a Christmas party or other function for you and any other employees/directors of your limited company, provided the total cost over the year is no more than £150 per head ( including VAT) together with the extra costs such as transport and accommodation. Other guests may be invited too, but the event must be primarily for entertaining staff and be open to all staff. In such circumstances, the cost is allowable in the company accounts and tax relief is calculated. To work out the cost per head, divide the total cost by the number of persons (staff and any other guests) attending the function.
Where the total cost per head exceeds £150, the cost will be an allowable deduction in the company accounts, as the employees would pay tax as a Benefit in Kind. The full cost will be disallowed for tax if it is found that the entertainment of staff is in fact incidental to that of entertaining customers. An arrangement can be made however, where the company meets the director’s/employee’s tax liability on their behalf. In this circumstance the joint cost can work out more expensive than where the entertaining costs being met personally.