Some clients like to have a few 'business lunches' amongst themselves throughout the year, so what is the tax position. I say the words 'business lunch' loosely as it is usually an excuse to have a jolly with your partner/spouse on the business.

There are three things consider:

1. Is it allowable against corporation tax?
2. Does it count as a taxable benefit-in-kind (BIK)?
3. Can the VAT be claimed on the costs?

VAT - we won't deal with this here as it has some very complex rules.

All costs whether it is a limited company or not, such as a sole-trader or partnership, must be COMMERCIALLY VIABLE. Costs that are disproportionate to the income or circumstance will be denied by HMRC; you cannot pay a child £1000 per month for 10hrs work, £100/hr is disproportionate, £15/hr would be reasonable.

Any one-off event, such as lunch, does count as taxable BIK, resulting in tax at 20/40% plus 15% NI, so at best it will cost 35% tax or worse at 55%; not to mention the extra accountancy costs for having of keeping track and the requirement to submit a P11d form at the end of the year. This includes any overseas business meeting / getaway.

Only the annual event such as Christmas party or summer BBQ (not both) would exempt from BIK tax, as long as the overall costs is <£150 per head p.a.

REMEMBER: make use of the £50 vouchers that can be bought per person (up to a max of 6 per tax year). You cannot double up and do 3x£100 or 1x£300 vouchers. (Amazon vouchers are good and easy, or when in your favourite clothing shop, buy a £50 voucher using the company debit card, then immediately use that voucher to go towards the rest of the purchase, paying for it personally, so two transactions, two receipts).

GOLDEN RULE: STOP HAVING BUSINESS MEETINGS ON THE COMPANY.