This guide explains your tax and National Insurance contributions (NICs) obligations if you provide an employee with expenses or benefits related to their entertainment of clients. ‘Entertainment’ covers food, drink or other hospitality.
On this page:
You provide an employee with expenses or benefits related to their business entertainment of clients. The same rules apply regardless of whether you:
In general, entertainment counts as business-related if its purpose is to:
By contrast, entertainment of business acquaintances won’t count as business-related if its purpose is really social – even if there’s some discussion of business topics in the course of the entertainment.
For employees earning at a rate of less than £8,500 per year, you have:
For company directors or employees earning at a rate of £8,500 or more per year:
Please note that there’s an entertainment-related tick-box on form P11D, in section N. This is used by HMRC to determine whether or not your employee will be able to claim a tax deduction for the entertainment expenses you’ve provided. There’s no need to enter anything in the box if you’re completing this form for a charity or a tonnage tax company. But otherwise:
The value to use is the cost of providing the entertainment, or the amount you pay or reimburse.
How a dispensation can reduce your expenses and benefits reporting
You arrange and pay the supplier directly for non-business related entertainment of clients by an employee.
In general, entertainment will be considered non-business related unless its purpose is to:
For employees earning at a rate less than £8,500 per year, you have:
For company directors or employees earning at a rate of £8,500 or more per year:
Please note that there’s an entertainment-related tick-box on form P11D, in section N. There’s no need to enter anything in the box if you’re completing this form for a charity or a tonnage tax company. But otherwise:
The value to use is the cost to you of providing the entertainment.
Your employee arranges non-business related client entertainment, but you pay the supplier directly for it.
In general, entertainment will be considered non-business related unless its purpose is to:
For employees earning at a rate less than £8,500 per year:
For company directors or employees earning at a rate of £8,500 or more per year:
Please note that there’s an entertainment-related tick-box on form P11D, in section N. There’s no need to enter anything in the box if you’re completing this form for a charity or a tonnage tax company. But otherwise:
The value to use is the amount you pay the supplier for the entertainment.
Your employee arranges and pays for non-business related client entertainment, and you then reimburse them for it.
In general, entertainment will be considered non-business related unless its purpose is to:
The amount you reimburse counts as earnings, so:
Please note that there’s an entertainment-related tick-box on form P11D, in section N. There’s no need to enter anything in the box if you’re completing this form for a charity or a tonnage tax company. But otherwise:
The value to use is the amount you reimburse to your employee.
It’s important to choose correctly between forms P11D and P9D for each employee. The form to use depends on the whether the employee is a director of your company and on whether their earnings are above or below an annual rate of £8,500. For more information – including details of what’s included in the £8,500 threshold - follow the link below.
EIM32565CT: Entertainment expenses
