Entertaining clients is an excellent way to build relationships and show appreciation, but when it comes to claiming tax relief, the rules can be tricky. What’s allowed, what’s not, and how can you make your spending as tax-efficient as possible?
Let’s break it down so you can focus on impressing your clients without worrying about HMRC.

What Counts as Client Entertainment?

Client entertainment typically includes:

• Meals and drinks
• Events and hospitality
• Gift-giving

These expenses are all grouped under the term 'client entertainment'. But how do they affect your business’s Corporation Tax and VAT?

Are Client Entertainment Expenses Tax Deductible?

Here’s the bad news: HMRC does not allow Corporation Tax relief on client entertainment expenses. Nor can VAT be reclaimed on this type of spending.

So, if you’re treating clients to a dinner or a night out, you won’t be able to deduct these costs from your company’s profits.

The Good News: Exceptions to the Rule

Not all client entertainment expenses are non-deductible. Here are some exceptions that could work in your favour:

1. Educational Events
   If the event is more about learning than socialising, it’s considered tax-deductible for Corporation Tax purposes. For example, hosting a seminar, workshop, or training session for your clients.
2. Charity Events
   Expenses for fundraising events or sponsorships involving clients are also allowable for Corporation Tax relief. Supporting a good cause can help your business while making a positive impact.
3. Mixed Events
   If your event includes both clients and employees, a portion of the expenses related to your employees can be claimed. This means you may be able to reduce your Corporation Tax liability and reclaim VAT on these expenses.

Keep Your Records Detailed

Accurate and detailed record-keeping is essential for claiming allowable expenses. Ensure you clearly document the nature of the event, who attended, and why the costs were incurred.

Make Entertaining Work for Your Business

While many client entertainment expenses aren’t tax-deductible, understanding the rules and exceptions can help you make smarter spending decisions. By planning educational, charitable, or mixed events, you can strengthen client relationships while benefiting your business financially.

Get the Business You Want

If you’re unsure about the rules or need guidance, our team at Carthy Accountants is here to help. Get in touch today and let’s make sure your client entertainment spending works for you.

At Carthy Accountants, we’re Helping You Get the Business You Want.

Here’s to entertaining smarter!