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A Guest At The Olympics? Here Are 6 Different Tax Treatments!
If you are lucky enough to be a guest at the Olympics, what sort are you and what tax is due?
1. Your client has invited you and your better half to enjoy the men's 100m final, plus you are wined and dined, all paid for by your client. Your company pays your train fare. You are hardly going to drive after all that free booze!
This is the E word - Entertaining! But it's mainly paid for by your client so it's his problem. What is that? Well, he can't claim any VAT deduction or any corporation tax relief for the cost. Happily you don't any suffer income tax. However, you won't be able to claim corporation tax relief for the train fare as the reason for the trip was Entertaining.
2. You take the train to meet a client at his business premises in Stratford, London to go through his year end figures. The meeting takes a while and you treat him to tea and sandwiches to keep you going. At the end of the meeting, he receives a call from his wife that she is too ill to go to the men's 10k final and he asks whether you'd like to accompany him. Of course you do! Afterwards, you buy a beer and pasty at the Olympic Park before making your way home.
The main reason for your trip to London was a business meeting and you therefore receive corporation tax relief for your train fare and subsistence. In this case it isn't unreasonable for a whole day out of the office to claim lunch and dinner, including refreshments for the business meeting. You can claim any VAT charged should you be inclined to get VAT receipts. No income tax or national insurance is due and if you have a PAYE Dispensation in place, there will be no P11D required either.
3. Instead of the Annual Christmas Party, you decided to treat you and your 4 staff to a day at the Olympics. You managed to get tickets for your staff plus a guest to go to the 800m womens swimming heats. As well as paying for the Venue ticket, your company paid for the train fare and food and drink all day. The average cost was £140 per head Incl VAT.
You can claim all costs for corporation tax relief as the total cost per person was less than £150 Incl VAT. You can reclaim the VAT for you and your staff but not their guests. If you had charged the guests say £5 for the day, you would have been able to reclaim all the VAT.
4. Your staff enjoyed the Olympics so much that you get some last minute tickets for the Paralympics basketball heats.
As the £150 Incl VAT Annual event limit has been pretty much used up, all costs for this day out are now the E word - Entertaining. This doesn't affect the corporation tax relief or ability to reclaim VAT, but it does mean there is a taxable benefit in kind so that income tax and national insurance is due. This might add 34% or 54% to the total cost of the day if your staff pay the income tax. You decide this will offset any feeling of goodwill you've created and decide to pay the income tax on their behalf, but this might add 42% or 89% to the company's cost for the day. It would have been better to wait another 12 months and treat the staff to something else!
5. In view of this you decide to get the company to treat you and your spouse to tickets for the closing ceremony for which some extra tickets were suddenly released.
As you are a director and you have already had the benefit of an annual staff event, this is entertaining. Similar issues arise as for the previous point, except that HMRC are unlikely to allow VAT to be reclaimed.
6. The client who treated you to the 100m men's final had such a good time that he has also sent you and your spouse the full set of cuddly Wenlocks and Mandevilles.
As the total cost of these mascots is less than £250, there is no income tax or national insurance charge on you. However, as before, your client won't be able to save corporation tax or recover the VAT on this purchase. If the cost was under £50 and the gift showed his company logo he would have received corporation tax relief and recovered the VAT paid.
The final true after tax cost of the Olympics events and gifts varies widely, so choose carefully for this event or for the next one!