When it comes to claiming business expenses, entertainment is a grey area many business owners misunderstand. This guide explains what qualifies as deductible business entertainment expenses in the UK for 2025, and what HMRC will disallow.
1. What Is Business Entertainment?
Business entertainment refers to hospitality provided to clients, customers, or suppliers, such as:
- Meals and drinks
- Event tickets (e.g. concerts, sports)
- Hospitality boxes
- Travel or accommodation
HMRC defines it as “entertaining someone who is not an employee”, which generally makes it non-deductible.
2. What Entertainment Costs Are Deductible?
Some entertainment expenses are allowable, particularly when provided to staff or for internal purposes.
Staff Entertainment – Allowable:
- Staff parties (up to £150 per head annually)
- Team-building events
- Office celebrations (e.g. birthdays)
Must be open to all employees and not just directors or selected staff.
Marketing Events – Partially Allowable:
- Product launches with promotional material
- Events where the public is invited and not exclusive
- Branded gifts under £50 (not food, drink, or tobacco)
3. What Is Not Deductible?
The following entertainment expenses cannot be deducted for Corporation Tax or Income Tax purposes:
- Client meals and drinks
- Tickets to events given to clients
- Golf days, hospitality boxes, or travel with customers
Even if these expenses are incurred wholly for the business, HMRC treats them as non-tax-deductible.
4. VAT on Entertainment
You cannot reclaim VAT on most business entertainment, unless:
- It’s for employees only (e.g. a staff party)
- The recipient is an overseas client and you meet strict rules
VAT on client entertainment or entertaining non-employees is generally blocked.
5. Record Keeping Tips
- Always separate staff entertainment from client expenses in your bookkeeping
- Keep receipts and a record of who attended and why
- Use expense categories to flag non-deductible costs for your accountant
How Eclat Accountancy Can Help
We help businesses:
- Accurately categorise entertainment expenses
- Ensure tax returns reflect allowable claims
- Avoid HMRC penalties for incorrect deductions
- Advise on tax-efficient staff reward strategies
Final Thoughts
While treating clients can help build relationships, most business entertainment is not tax deductible. Focus on compliant staff-related entertainment and ensure accurate bookkeeping to stay HMRC-ready.
Contact Eclat Accountancy today for clarity on entertainment expenses and smarter business tax planning in 2025.
