Andrew Needham looks at the VAT recovery position on the entertainment of overseas customers.
VAT incurred on goods or services used for business purposes can normally be recovered as input tax. However, tax on the provision of business entertainment cannot normally be recovered.
Business entertainment covers customers and other business contacts, but not staff. Subject to certain restrictions, the recovery of VAT on the provision of staff entertainment is allowed. HMRC defines the term ‘entertainment’ as the provision of hospitality of any kind.
What is business entertainment?
For VAT purposes, entertainment can take many forms. Some examples given by HMRC of costs which are regarded as entertainment or the provision of hospitality include:
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the cost of providing food and drink;
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