What are Entertainment expenses?
Entertainment expenses refer to the costs incurred providing food, drink or anything else to a client or supplier. So if you take a client out for a meal with the intention of strengthening your business relationship that is an entertainment expense.
Entertainment expenses must be primarily for business purposes (ie. this must be related to your business!).
How are Entertainment expenses treated for tax purposes?
Entertainment sits in a weird category on it’s own for tax purposes. You can put the costs of entertainment through the company (so if you paid for a meal personally you can be reimbursed).
However, despite this the cost is not tax deductible for Corporation Tax purposes.
So what should I do?
The best thing to do is to charge your company for Entertainment expenses and make sure they are clearly allocated as such (by posting to the Entertainment – 100% Business account in Xero).
Without the corporation tax relief you might be wondering why it’s worthwhile to have the business pay for these costs rather than you personally. Remember though that before you get any money in your personal bank account you are likely to have incurred some income tax when that money was transferred to you.