Claiming VAT on Business Entertainment and Staff Expenses – What You Need to Know 

VAT rules on entertainment and staff expenses can be confusing. Some costs are fully reclaimable, others not at all, and sometimes only a proportion can be recovered. This guide explains the differences and helps you avoid costly VAT mistakes. 

Business Entertainment 

HMRC defines business entertainment as hospitality provided to people who are not employees. This includes: 

• Client meals and drinks. 

• Tickets to sporting events or concerts. 

• Corporate hospitality days. 

VAT position: You cannot reclaim VAT on these expenses. HMRC views them as a business choice rather than a necessity. 

Staff Entertainment 

When entertainment is provided solely for employees — such as annual parties, team‑building days, or staff awards — VAT can be reclaimed in full. 

Example: A summer BBQ for staff only means the full VAT is reclaimable. 

However, directors, partners or sole proprietors of the business do not qualify and the VAT in relation to these are blocked.  

Mixed Entertainment 

If staff and non‑employees (such as clients) attend the same event: 

• Only the staff (non-directors) portion of the VAT can be reclaimed (but only if the staff members are not working to host the clients) 

• The client portion is not recoverable. 

Example: At a dinner for 10 staff and 5 clients, only two‑thirds of the VAT can be reclaimed. 

Staff Expenses You Can Reclaim VAT On 

• Business travel and meals during work trips. 

• Hotel accommodation for business purposes. 

• Office supplies and equipment used for work. 

You cannot reclaim VAT on commuting, private purchases, or goods/services intended for personal benefit. 

Record‑Keeping Tips 

• Keep valid VAT invoices for all expenses. 

• Separate client entertainment costs from staff costs on invoices wherever possible. 

• Regularly review expense policies to ensure compliance with VAT rules. 

Key Points 

• VAT on business entertainment for non‑employees is not reclaimable. 

• VAT on staff (non-directors) entertainment can be reclaimed in full if no clients or guests attend. 

• Mixed entertainment requires apportioning VAT between staff and non‑staff. 

• Proper invoicing and record‑keeping make VAT recovery much easier. 

Unsure what VAT you can and can’t reclaim? 

Entertainment and staff expense rules can be complex, and mistakes may lead to unexpected HMRC bills. We can review your expense policies, train your team, and make sure you’re claiming every penny you’re entitled to — without risking penalties. 
 

Contact Jane Deeks at Deeks VAT Consultancy for professional advice across all industries.  

jane@deeksvat.co.uk | 07710553831 | LinkedIn