Potential entertainment tax bonus

Businesses in the Borough of Rochdale could line themselves up for a windfall VAT rebate following findings by the EU Advocate General, which could entitle businesses in the UK to retrospectively claim back on VAT payments on entertainment expenses, according to RSM Tenon.

Tax advisers at the accountancy and business advisory firm, RSM Tenon, are urging businesses to make protective claims of up to four years of VAT payments on entertainment expenses, in anticipation of the European Court of Justice upholding the opinion of the Advocate General that the definitions of ‘entertainment’ in VAT laws do not meet EU regulations. Although a full decision may take time to be ratified, businesses should consider protecting their position by submitting claims or extending existing claims, up to and including four years from when the original claim is filed.

Currently, a business cannot reclaim VAT on ‘business entertainment’ but can claim it back on ‘subsistence’. Entertainment is defined as any kind of free or subsidised entertainment or hospitality to non-employees. So for instance, the wining and dining of a business client cannot be claimed, but an employee Christmas party or a hotel stay for business purposes can be claimed.

Barry Stocks, Head of North West VAT and indirect tax services at RSM Tenon, said: “Business owners should be aware that failing to take advantage of this favourable opinion could leave them tens of thousands of pounds out of pocket if they allow a claim to fall out of time. This decision may have come at a bad time for HMRC, as it will now be preparing itself for a deluge of retrospective tax claims, but UK businesses should not ignore this opportunity which, comes at a time when many are facing tighter regulations and higher tax payments.”