Reply to: Can I expense my leaving drink?

[Jessica@WhiteFieldTax]

As well as being disallowed for Corporation Tax, it may also be

(i) subject to Class 1A NI and

(ii) taxable on the employee - seee hmrc expenses "bible", booklet 480 chapter 20, 20.6 et seq

Yes, this is double taxation in some circumstances, and its often missed even by unclued by HMRC bods.

[blinko]

You can claim it as client/supplier entertainment, it won't be allowable for corp tax

[minstrel]

The other point to remember is that such expenses are not allowable against VAT since they are not a value added service (unless, for reasons I've never really understood, your guests are exclusively non-UK nationals...).

Good point Malvolio.

This wouldn't have an impact if company is on VAT Flat Rate Scheme as no expenses are allowable against VAT (apart from £2k+ capital expenditure)

[malvolio]

The other point to remember is that such expenses are not allowable against VAT since they are not a value added service (unless, for reasons I've never really understood, your guests are exclusively non-UK nationals...).

[minstrel]

Aah I see so it only really makes sense to expense it if you are a higher rate taxpayer (and like NLUK says may not be worth the hassle even then...)

Even if you are not higher rate tax payer it is still worth putting through everything you can as Business Entertainment as you get an effective tax rate of 16.7%

For example, if you end up with £1,000 bar bill at your leaving drinks, you can claim that as an expense, but it may not be allowable for CT purposes.

£200 CT may be due on the £1,000. So your company has "used up" £1,200 of profit at a tax cost of £200 and you have £1,000 in your back pocket.

Effective tax rate is therefore £200/£1,200 = 16.7%.

My view is HMRC are possibly less likely to challenge expenses that have been declared as Business Entertainment as company is paying the CT.

It's worth putting through a few thousand pounds of "justifiable" Business Entertainment as you are extracting the cash at 16.7% which is better than the dividend route where you would pay 20% even for lower rate tax payers.

Certainly, if you are in a position where company has profits which could be distributed as dividends which would make you a higher rate tax payer, Business Entertainment is one way of extracting money from the company at a "reasonable" tax rate.

[Jessica@WhiteFieldTax]

Life's too short.

Claim it and worry about HMRC if they ever look at your books. Worst case is they ask for tax on it, more likely they may say "don't do it again". Risk of serious problems? Low.

[northernladuk]

Sure, put it down as your annual party.....

Which has it's own set of rules that a drinks session won't meet.

[Wanderer]

These bankers are a thirsty lot...

Sure, put it down as your annual party.....

[SueEllen]

You haven't paid for it personally so the money stays in your pocket.

If you pay personally it is income-drinks = what you have left
If you expense it as entertainment it is income = what you have left

And as you can imagine it is such tiny amounts it is just better to leave the company out of it altogether.

If it's in the city it won't be tiny amounts.

Plus if you have a lot of expenses adding entertainment for people isn't a hassle.

[kal]

Yes- if you a higher rate of tax payer. It means you don't have to pay in out of your persosanl money and incur 25 percent tax (once you take out dividends up to the hrt limit essentially you pay 25 in tax for the dividends above the threshold).

Aah I see so it only really makes sense to expense it if you are a higher rate taxpayer (and like NLUK says may not be worth the hassle even then...)

[No2politics]

Can I expense my leaving drink?

If its not exempt from CT is there any point in even putting it down as company expense? Any benefit rather than just paying for it personally?

Yes- if you a higher rate of tax payer. It means you don't have to pay in out of your persosanl money and incur 25 percent tax (once you take out dividends up to the hrt limit essentially you pay 25 in tax for the dividends above the threshold).

[northernladuk]

If its not exempt from CT is there any point in even putting it down as company expense? Any benefit rather than just paying for it personally?

You haven't paid for it personally so the money stays in your pocket.

If you pay personally it is income-drinks = what you have left
If you expense it as entertainment it is income = what you have left

And as you can imagine it is such tiny amounts it is just better to leave the company out of it altogether.

[kal]

You can put it on your company expenses but as it's entertainment then it's not exempt from corp tax.

If its not exempt from CT is there any point in even putting it down as company expense? Any benefit rather than just paying for it personally?

[northernladuk]

You can put it on your company expenses but as it's entertainment then it's not exempt from corp tax.

+1...

And personally I keep pure alcohol off my books. A meal with drinks maybe. Just buying drinks isn't my thing so it comes out of my pocket.

[northernladuk]

Ofcourse yes, its called business expense. (wholly and exclusively to get future contract...you would hope!)

Please tell me you are joking.....