Hi, the other day i recieved a letter from the accountant advising that EU are looking to pass an accounting legisation that we can claim back VAT on entertainment expeneses plus can claim it up to four years back dated. This would include christmas partys etc, just wondering if anyone else as heard anything regards to this.
Do you mean Eu legislation that would impact the UK VAT system, or do you mean expenses by a UK co in the EU?
You can already reclaim VAT on employee expenses and ents expenses if they relate to travel and subsistence or where you entertain employees only. You cannot recalim VAT however if a non employee expense.
Seems strange that an accountant would send this out!
I think that you need further details on your reading as you've only taken exerts from the current thinking on entertainment expenses.
Christmas parties are already allowable provided that no more than £150 is spent per employee throughout the financial year on entertaining that employee.
VAT is already reclaimable when entertaining overseas clients. (not UK clients). See the case of Danfoss and AstraZeneca (Case-371/07). Whilst it seems logical that this would make the meal an allowable (deductible) expense for tax purposes such is still being decided by HMRC.
the test for whether VAT would be reclaimable would be
* details of the overseas clients (not overseas suppliers) * the type of expenditure (e.g. meal, drinks, etc.) * evidence that the VAT had not previously been deducted
As you state you can back claim for this but that should be three years plus the current year (sometimes referred to as 3+1), not four years.
For entertaining of UK clients I think that you will find that you have applied logic to your reading (never fill in the gaps in HMRC releases) but you might need to re-read with the following in mind.
BIM37670 seems to reverse earlier HMRC thinking in the section related to itinerant trade journeys. This makes it clear that when entertaining clients the expense of travel and necessary expenditure is tax deductible. However, the cost of entertaining the client not an allowable expense!!!!
I would not change the way that entertaining expenses are being handled for VAT, TAX and reporting purposes from the way that such is being treated currently as this is an area where no clear rule changes have arisen but case law is challenging traditional thinking and HMRC is looking at whether such effects existing treatment.
This is not coming from an EU directive as they have no control over UK tax legislation (and hopefully now that there has been a change of administration in the UK they will lose some of the powers that the previous government gave away).
I worry what some accountants send out to their clients as a little information in the wrong hands can be a dangerous thing. For example, they told you, you posted on here, now possibly hundreds of bookkeepers will read this and believe that matters are changing more than they really are.
What's the old saying, A little knowledge is a dangerous thing!
The above is meant for discussion purposes only. Please do not construe any of the above as technical advice. If this is an area that affects you or one of your clients please seek independent advice of a properly qualified accountant.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
hi i meant the EU legislation that would impact the UK VAT system foe the entertainment expenses, like christmas partys and entertaining clietns.
"You also cannot reclaim VAT on the following business expenses.
Generally, you cannot reclaim VAT paid on any items related to goods or services you sell that are exempt from VAT, although there are exceptions.
Get information about exempt and part exempt sales
VAT cannot usually be reclaimed on business entertainment expenses."
please see inrEU annoucement: http://www.pkf.co.uk/web/pkf.nsf/afb7e018aedc6fd88025725e0051f241/b7a9787bd5249d17802576d9005bb5b8/$FILE/VAT%20refunds%20on%20business%20entertainment.pdf
A change in Dutch tax law has no immediate effect on UK tax law although it could set a presedence.
This may form a european directive which the UK government may choose to incorporate in UK legislation.
Accountancy practices really shouldn't issue "This may or may not happen in the future" type announcement's to clients. Such discussions should only be the subject of internal memo's until something is written in stone with regards to tax legislation.
Note the small print on the announcement :
Neither PKF (UK) LLP nor its partners or employees accept any responsibility for loss or damage incurred as a result of acting or refraining from acting upon anything contained in or omitted from this document.
We as bookkeepers of course deal in what is, not what may be and this PDF should be disregarded by everyone on here.
Non of the above is intended in any way an a slur against PKF who are a very competent and professional organisation.
-- Edited by Shamus on Tuesday 25th of May 2010 10:57:18 AM
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I think it all has been much ado about nothing, see the quote below and the website if you want further info.
"The ECJ decision on business entertainment is out (Case C-33/09). It looks at first glance that the Court has overturned the AGs Opinion and held that broad phrases to block input tax recovery are permitted and the firms that were ramping up the possibility of claims have egg on their faces.
Have a read of the case off the Curia website http://curia.europa.eu/jcms/jcms/j_6/ and see what you think."
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Forgive the typo's I generally do not proof read. Just lazy I guess!
