The Dilemma of Claiming VAT on Entertainment and Subsistence Expenses for Businesses in the UK

on April 1, 2024
This article was written by Catherine Mendez Pena.

The Dilemma of Claiming VAT on Entertainment and Subsistence Expenses for Businesses in the UK


In the dynamic landscape of business expenses, entrepreneurs and business owners often find themselves navigating the complexities of Value Added Tax (VAT) regulations. One area that often sparks debate is whether to claim VAT on entertainment and subsistence expenses. In the UK, understanding the rules and implications surrounding this issue is crucial for businesses aiming to maximize their financial efficiency and compliance.

Entertainment Expenses:

Entertainment expenses, which include client meetings, events, and hospitality, can be a gray area when it comes to VAT claims. According to HM Revenue & Customs (HMRC) guidelines, businesses can only claim VAT on entertainment expenses if they are directly related to the company’s trade and are not lavish or extravagant.

For instance, expenses related to client meetings or events that have a clear business purpose, such as fostering relationships or securing contracts, may be eligible for VAT claims. However, expenses incurred for purely entertainment purposes, like staff parties or recreational events, are typically not VAT recoverable.

Subsistence Expenses:

Subsistence expenses, covering meals and accommodation during business travel, also present challenges in the realm of VAT claims. HMRC allows businesses to claim VAT on subsistence expenses that are directly related to business activities. For example, if employees are required to travel for work purposes and incur meal or accommodation expenses, the VAT incurred on these costs can generally be reclaimed.

However, businesses should be mindful of the distinction between business-related and personal expenses. VAT cannot be claimed on subsistence expenses that are incurred for personal enjoyment or convenience rather than for business purposes.

Considerations for Claiming VAT:

Business Purpose:

Before attempting to claim VAT on entertainment and subsistence expenses, businesses must ensure that these costs are directly linked to their trade. Clear documentation and evidence of the business purpose should be maintained to support any potential claims.

Lavishness Test:

HMRC’s “not lavish or extravagant” test can be subjective. Businesses should exercise prudence in determining whether an expense passes this test and consult with tax professionals if unsure.


Comprehensive and accurate record-keeping is paramount when it comes to VAT claims. Proper documentation of receipts, invoices, and the business purpose of each expense will help businesses substantiate their claims during a potential audit.



The decision to claim VAT on entertainment and subsistence expenses in the UK involves careful consideration of the nature of the expenses and adherence to HMRC guidelines. While it can be tempting to maximize VAT reclaims, businesses must ensure that their claims align with the regulations to avoid potential penalties and scrutiny. Seeking professional advice from tax experts can provide invaluable guidance and help businesses navigate the intricacies of VAT claims in the realm of entertainment and subsistence expenses.

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