Client Entertainment – a taxable benefit ?

At this time of year, probably more than any other, you and your staff / team members often entertain clients for business purposes, for example over a working lunch.

However, if detailed records are not maintained, this could be considered as a taxable benefit for your team member.

The purpose of the ‘client entertainment’ should be to discuss business, maintain connections or make new business connections.

If the entertainment is being provided as a reward to a team member it is taxable on them.

Keeping records of client entertainment

It is important to keep sufficient supporting evidence of your client entertainment expenditure including:

•  The name of the employee/s undertaking the entertaining and names of the clients
•  The date of expenditure
•  The reason for the expenditure (e.g. business lunch, developing new relationship)
•  The nature of the entertainment
•  The receipt/s that relates to the expenditure

Entertainment can involve eating, drinking and other hospitality.

Types of entertainment include:

•  ‘business entertainment’ of clients – eg discussing a particular business project or forming or maintaining a business connection
•  ‘non-business entertainment’ of clients – eg entertaining a business acquaintance for social reasons

Expert Opinion provided  by Hallidays, Stockport