Evidence for Client Entertainment Expenses Evidence for Client Entertainment Expenses
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    Question Evidence for Client Entertainment Expenses

    I've recently been discussing with my accountant about claiming client entertainment expenses, and it seems to boil down to two options:
    • Claim half of the dinner cost as subsistence.
    • Claim the entire amount as client entertaining.


    I've worked out that the difference between both cases, once corporation tax and higher rate dividend tax have been taken into account, is that I would be 5% of the meal cost better off if I claimed the entire amount as client entertaining.

    If I spend £5000 a year on client entertaining, that's only £250 better off. Doesn't seem worth bothering with and taking the risk with tax inspection. However, there are cases where I might want to claim client entertaining where subsistence is not an option, such as Friday evenings, or even weekends. My accountant has already outlined the nuances in terms of client entertaining being mostly business, mostly social, etc. The question I have for the forum is, having read some articles online (such as this American one that has similar considerations), what level of proof must I have that an evening meal or lunch/dinner at the weekend was client entertaining? Bear in mind I'm an IT contractor. Would an inspector really expect me to produce evidence of e-mails setting up the dinner with my boss, or a list of names of attendees (such as boss and/or other contractors I work with)? Would an inspector ever go as far as contacting those people?

    Or, for relatively such small amounts (say, less than £5000 a year), am I being too paranoid?

    Thanks in advance.

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    Do as a business would do. Plenty of the DHL directors that have taken me out for a meal don't record that it was me they were buying food for. They also don't take a head count when a £600 bill comes their way.

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    Quote Originally Posted by Neo View Post
    I've recently been discussing with my accountant about claiming client entertainment expenses, and it seems to boil down to two options:
    • Claim half of the dinner cost as subsistence.
    • Claim the entire amount as client entertaining.


    I've worked out that the difference between both cases, once corporation tax and higher rate dividend tax have been taken into account, is that I would be 5% of the meal cost better off if I claimed the entire amount as client entertaining.

    If I spend £5000 a year on client entertaining, that's only £250 better off. Doesn't seem worth bothering with and taking the risk with tax inspection. However, there are cases where I might want to claim client entertaining where subsistence is not an option, such as Friday evenings, or even weekends. My accountant has already outlined the nuances in terms of client entertaining being mostly business, mostly social, etc. The question I have for the forum is, having read some articles online (such as this American one that has similar considerations), what level of proof must I have that an evening meal or lunch/dinner at the weekend was client entertaining? Bear in mind I'm an IT contractor. Would an inspector really expect me to produce evidence of e-mails setting up the dinner with my boss, or a list of names of attendees (such as boss and/or other contractors I work with)? Would an inspector ever go as far as contacting those people?

    Or, for relatively such small amounts (say, less than £5000 a year), am I being too paranoid?

    Thanks in advance.
    You spend £5k a year entertaining customers? I guess you are not just a contractor on a day rate.

    I would assume the worst and plan that the HMIT will do whatever is possible to prove your claim if he smells a rat. If it is a genuine claim it will have the documentation he requires so not a problem.
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    Quote Originally Posted by northernladuk View Post
    You spend £5k a year entertaining customers? I guess you are not just a contractor on a day rate.

    I would assume the worst and plan that the HMIT will do whatever is possible to prove your claim if he smells a rat. If it is a genuine claim it will have the documentation he requires so not a problem.
    'If'

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    Just to add to make life easier for yourself in many ways having evidence of doing things including an email is a good idea.

    That's of course unless you are doing something dodgy then you don't want to even have phone records..........
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    Quote Originally Posted by Sockpuppet View Post
    Do as a business would do. Plenty of the DHL directors that have taken me out for a meal don't record that it was me they were buying food for. They also don't take a head count when a £600 bill comes their way.
    So, what's to stop someone illicitly claiming every restaurant meal with their partner and every coffee shop visit at the weekend as a business entertaining expense? (Apart from moral obligation)

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    Quote Originally Posted by Neo View Post
    So, what's to stop someone illicitly claiming every restaurant meal with their partner and every coffee shop visit at the weekend as a business entertaining expense? (Apart from moral obligation)
    You cannot stop people breaking the law. You can only punish them when they are caught doing so.

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    Quote Originally Posted by Neo View Post
    So, what's to stop someone illicitly claiming every restaurant meal with their partner and every coffee shop visit at the weekend as a business entertaining expense? (Apart from moral obligation)
    That's the world we live in though right? Whats to stop you filing a fake insurance claim, downloading a pirated movie, stealing milk money, or walking on the grass when the sign says not to - faking expenses claims are no different and there are laws and regulations that society would prefer you to abide by.
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    Quote Originally Posted by Neo View Post
    So, what's to stop someone illicitly claiming every restaurant meal with their partner and every coffee shop visit at the weekend as a business entertaining expense? (Apart from moral obligation)
    If you want to risk an investigation and a tax bill you cannot pay for the price of a coffee that is up to you. I mean, it is coming out of your pocket anyway so there is nothing to gain but a few percent of the tax man that he will want back, with a fine, with interest later.
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