Changes to reclaims of VAT on Business Entertaining of Overseas Customers

HM Revenue & Customs (HMRC) has reviewed its policy on the treatment of business entertainment provided to overseas customers in the light of the European Courts of Justice (ECJ) judgment in the joined case of Danfoss and AstraZeneca. This allows input VAT on the entertaining of overseas customers to be reclaimed in many case. 

The UK has blocked the recovery of input tax on business entertainment, so that input VAT on business entertaining cannot be recovered. This block still remains for entertaining of  UK customers, but  since the inception of VAT. The terms of the block denied recovery of such input tax except where the business entertainment was provided to an overseas customer. In 1988 UK law was amended to extend the block to cover all business entertainment including that provided to overseas customers.

The block on recovering input tax on entertainment provided to anyone other than an overseas customer, for example, UK customers and non-UK business contacts who are not customers, remains effective and any VAT incurred on the costs of such entertainment cannot be recovered.

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