VAT – Entertainment provided to directors and partners of a business

by Aitch, posted in Value Added Tax

When considering VAT on entertainment provided solely to directors or partners of a business it is generally not recoverable as VAT Input Tax.

HMRC considers that directors and partners are not in need of entertainment to motivate themselves, so such costs are not for business purposes. However, exceptions apply for subsistence costs (e.g., meals or accommodation during business travel), and no apportionment is needed when directors or partners attend general staff events.

In contrast, VAT incurred on entertainment for employees, such as staff parties, team-building events, or outings, is usually considered by HMRC as a business expense and can be fully recovered.

In cases of mixed entertainment, where both employees and non-employees (e.g., guests) are present, the VAT must be apportioned. Only the portion relating to employees is recoverable. VAT on entertainment for non-employees is generally blocked, unless the guest is an overseas customer, in which case input tax is not blocked, but output tax may apply.

Source:HM Revenue & Customs | 21-09-2025
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Aitch
I'm Aitch, the Founder and CEO of CIGMA Accounting Ltd. As a Chartered Management Accountant and as a CIMA member, I've spent more than 16 years helping businesses, entrepreneurs, landlords, and individuals with tax planning, accounting, and HMRC compliance. As a chartered accountant in London, I'm passionate about making complex tax matters easier to understand and helping clients make confident financial decisions. Over the years, I've advised start-ups, SMEs, established companies, and high-net-worth individuals across a wide range of tax and accounting matters. My expertise includes Corporation Tax, Self-Assessment, Capital Gains Tax, Inheritance Tax planning, R&D tax relief, capital allowances, international tax, and resolving complex HMRC compliance issues. Whether clients need a business accountant, tax accountant, or strategic tax advisor, my focus is always on delivering practical advice that creates long-term value. One of my specialist areas is Making Tax Digital (MTD). I've worked extensively with businesses preparing HMRC's digital reporting requirements, helping them move to cloud accounting, improve financial processes, and adopt technology that makes compliance more efficient. I regularly speak at Making Tax Digital roadshows, industry events, and educational sessions in collaboration with Zoho Books, sharing practical insights into digital accounting, tax legislation, and the future of the profession. Many business owners looking for the best accounting firm in London are not simply searching for an accountant they're looking for trusted advice, responsive support, and long-term value. That's the approach I've taken in building CIGMA Accounting. My team and I work closely with businesses across London and the UK, providing accounting services, tax advisory, bookkeeping, payroll, VAT, company accounts, and strategic tax planning tailored to each client's goals. Through this website, I share practical guidance on UK taxation, Making Tax Digital, HMRC updates, Corporation Tax, Self-Assessment, and business finance. My aim is to provide reliable, straightforward information that helps business owners understand changing regulations, reduce compliance risks, and make informed financial decisions with confidence.
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