With Wimbledon signalling the start of the summer corporate hospitality season, Baker Tilly is warning businesses not to get caught out by the taxman when offering perks to clients and staff.
Businesses are being advised of the differences in the tax treatment of client entertainment and staff entertainment, and the need to carefully document all corporate hospitality expenditure.
The tax on tickets for events bought for employees can either be paid by the employee, or be treated as a taxable benefit in kind on the employee.
Businesses are able to purchase tickets for staff and offset the cost against the taxable profits of the business, but they need to be aware that HMRC will treat this as a benefit in kind and deduct additional tax from the employee’s wage packet directly.
On the other hand, while businesses may purchase tickets for clients, the costs of doing so cannot under any circumstances be offset against profits for corporation tax purposes.
However, any staff that attend to entertain clients are not considered to have a taxable benefit.
Mark Collins, national head of Baker Tilly’s employer consulting group, said:
“There is a common misconception that corporate entertaining is an easy way to have fun while legitimately saving lots of tax, and this is far from the truth.
“Corporate entertaining can be a complicated tax area and the tax treatment of businesses buying tickets for employees is completely different from that of buying them for clients.
“If you are planning to take clients or allow staff to attend corporate events without clients this summer it is vital that you keep good records so that you can deal with the tax treatment accordingly and prevent any issues arising with HMRC.”