Client Entertainment

Overview 🍻

Entertaining clients and customers is a common business practice. However, the tax treatment differs significantly depending on whether costs are for clients or for employees.

✅ Corporation Tax Treatment

• Client entertaining is not deductible for corporation tax purposes.
• Staff entertaining is deductible, provided it is not incidental to client entertaining.

This means that if an event involves both employees and clients, businesses must apportion costs carefully to separate client entertaining from staff entertaining.

🔍 Example

Your company hosts a summer party with 20 employees and 10 clients. The total cost is £3,000.

• Allocate costs proportionately:
  • Employees: £2,000 (allowable for tax)
  • Clients: £1,000 (disallowable for tax)

Only the £2,000 staff portion is an allowable expense for corporation tax. However, not the rules on staff entertainment, as there may be a related benefit in kind tax charge for your employees.

💡 Practical Tip

Keep detailed records of attendees and costs to support any apportionment - including receipts and paperwork. You can also leave notes against the transaction in Xero.