VAT recovery on costs of entertaining overseas business customers
In early November 2010 HMRC issued Revenue & Customs Brief 44/10 announcing some changes in the VAT treatment of these costs. This change follows the judgement in the cases of Danfoss and Astra Zeneca. The opportunity for claims over the last four years will exist but businesses will need to meet two tests and if these are not fulfilled then there may be a private use charge which is likely to make claims less effective .
Any businesses that have incurred entertainment costs for overseas customers in the last four years should review their expenditure to consider whether a claim might be worthwhile and then establish whether they can meet the “tests” required by HMRC.