VAT on business entertainment is usually blocked. Learn when you can reclaim it, including staff events, overseas clients and meeting refreshments 

Businesses often host meetings, events or networking sessions that involve food, drinks or hospitality. While these activities can support relationships with clients, suppliers or investors, they also raise an important VAT question.

In most cases, VAT on business entertainment cannot be reclaimed. HMRC blocks VAT recovery on many hospitality expenses provided to non-employees. Understanding the rules helps businesses avoid incorrect VAT claims while still reclaiming VAT where the law allows.

What counts as business entertainment?

HMRC defines business entertainment broadly. It covers hospitality provided by a business to anyone who is not an employee.

This can include:

• Meals or drinks provided during meetings
• Hospitality at events or conferences
• Tickets for sporting or cultural events
• Corporate hospitality for clients or investors

If a business provides food, drink or other hospitality free of charge to customers or contacts, HMRC generally treats this as business entertainment.

In these situations, VAT on the cost of the hospitality usually cannot be reclaimed.

When VAT cannot be reclaimed

The main rule is simple. VAT cannot be recovered on business entertainment provided to clients, customers or other external contacts.

Examples include:

• Taking clients out for a meal
• Hosting a hospitality event for potential investors
• Providing drinks at a networking reception
• Offering catering at a client event

Even if the entertainment supports marketing or business development, VAT recovery is normally blocked.

Exceptions to the rule

There are limited exceptions where VAT recovery may still be allowed.

Employee entertainment

VAT can usually be reclaimed when entertainment is provided only for employees.

Typical examples include:

• Staff parties or social events
• Internal meetings with refreshments
• Team-building activities

If non-employees attend the event, VAT may need to be apportioned between employees and guests.

Overseas customers

VAT may also be reclaimed on entertainment provided to overseas business customers, provided certain conditions are met.

This exception recognises that hospitality can form part of normal international business relationships.

Businesses should keep clear records to demonstrate that the guests qualify as overseas customers.

Light refreshments during meetings

HMRC takes a strict approach to hospitality costs. However, a practical relaxation can apply where light refreshments are provided during meetings or business events.

Examples include:

• Tea or coffee
• Soft drinks
• Biscuits or snacks
• Simple sandwiches during longer meetings

Where refreshments are modest and necessary because a meeting runs through normal meal times, HMRC is less likely to treat them as entertainment.

Businesses should take a reasonable approach when reclaiming VAT in these situations.

VAT on associated event costs

Even where hospitality prevents VAT recovery on food and drink, VAT may still be recoverable on other event-related costs.

Examples include:

• Venue hire
• Equipment hire such as projectors or presentation systems
• Professional services used to organise the event

The key point is the purpose of the event.

If the event primarily provides business information, VAT on associated costs may still be recoverable even though VAT on catering is blocked.

Example: VAT partly recoverable

A company holds a presentation for potential investors to explain its business model and growth plans.

The company pays for:

• A meeting room
• Presentation equipment
• Professional presentation support
• A catered buffet with drinks

The event’s purpose is to present business information. In this case:

• VAT on the venue and presentation costs may be recoverable
• VAT on the food and drinks is blocked because it counts as entertainment

Example: VAT not recoverable

A company hosts an informal networking reception for investors where the focus is social interaction rather than a business presentation.

In this case, the event is considered pure business entertainment. VAT on all related costs, including venue hire and catering, is normally blocked.

Practical VAT planning tips

Businesses should review hospitality expenses carefully before reclaiming VAT.

Useful steps include:

• Separating catering costs from other event expenses
• Keeping invoices that clearly identify each type of cost
• Recording the purpose of business events
• Taking a reasonable approach to modest refreshments

Good record keeping helps support VAT recovery where it is allowed.

Need advice on VAT and business expenses?

VAT rules around entertainment and hospitality can be complex, particularly when events combine business presentations with catering.

David Howard supports businesses with VAT compliance, expense reviews and HMRC reporting requirements. Our team provides clear guidance so you understand which costs qualify for VAT recovery and how to report them correctly.

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