Business Entertainment

One of the perks of running a limited company is that you can entertain business contacts - meals, sporting events, or theatre trips can all be part of building and maintaining relationships.

However, you cannot claim VAT on these expenses and you cannot use them to reduce your profits for corporation tax.

Should I just pay personally instead then? Well no - the best way to describe an entertaining expense from a tax point of view is it’s like taking a dividend but not paying the personal tax on it - you do still have to pay the corporation tax though.

What Counts as Client Entertaining?

Client entertaining is anything you do to build or maintain a business relationship, including:

Meals and drinks
Sporting events
Theatre or concert tickets

It must be reasonable and directly related to your business relationship - you can’t just “treat” someone for the sake of it.

For Example: imagine taking a client who has the potential to generate £500 in sales with your company to a dinner and theatre show that costs £250. That’s almost half their potential spend! HMRC would likely see that as excessive and unreasonable.

How to Record the Expense

To keep your accounts clear and compliant:

Post the expense to an account called “Business Entertaining” or “Client Entertainment” in your bookkeeping software.
Do not claim the VAT.
Include a clear description for each expense:
Who, what, why – for example:
John Smith, Theatre Tickets, Discussing the opportunity to refer clients to one another

Keeping this information ensures your records are transparent and demonstrates the business purpose if HMRC ever asks.

Bottom Line

Entertaining clients is a legitimate perk of having a limited company, and from a tax perspective it’s worthwhile — but it’s never completely tax free. Keep it reasonable, well-documented, and enjoy the occasional night out on the business!