Can You Claim VAT on Staff Entertaining UK?

Learn when VAT can be reclaimed on staff entertaining in the UK, who qualifies as an employee, and what exceptions apply for directors and partners.

Staff entertaining is a common business expense in the UK – whether it’s a staff party, a team-building event, or an annual dinner. But when it comes to reclaiming VAT, many businesses are unsure where the line is drawn. The good news is that VAT on staff entertaining is usually reclaimable, but there are important conditions to meet.

This guide explains what HMRC counts as staff entertaining, who qualifies as an employee, when VAT can be reclaimed, and what happens if others attend the same event.

What Is Staff Entertainment?

For VAT purposes, staff entertainment refers to the cost of providing hospitality or leisure activities to employees, such as:

  • Christmas parties

  • Summer socials

  • Team-building events

  • Staff lunches or dinners

  • Workplace celebrations or internal rewards

If the entertainment is solely for employees, and is not part of a reward for services, HMRC typically allows VAT to be reclaimed.

Can You Claim VAT on Staff Entertainment?

Yes – in most cases, you can reclaim VAT on staff entertaining, as long as:

  • The cost relates to current employees only

  • The entertainment is for the benefit of the business

  • The VAT has been properly accounted for and invoiced

This means you can claim VAT on venue hire, food, drink, and activities provided at staff functions or events. However, once non-employees are involved, things get more complicated.

Who Counts as an Employee for Staff Entertainment?

HMRC defines employees narrowly for VAT purposes. The following people are considered employees:

  • Full-time and part-time staff on the payroll

  • Temporary staff who are on PAYE

  • Directors and office holders

  • Partners in a partnership

You cannot claim VAT on entertainment provided to:

  • Former employees

  • Subcontractors

  • Consultants

  • Shareholders (if not employees)

  • Family members or friends of employees

If a staff member brings a guest to an event, you must apportion the VAT and only reclaim the portion relating to employees.

Are There Exceptions for Directors and Partners?

Yes. Directors, company officers and partners are classed as employees when attending internal staff events. This means VAT can be reclaimed on entertainment provided to them, just like any other staff member.

However, if a company only has directors and no other employees, HMRC may take a stricter view. The event must have a clear business benefit, not just be social in nature, otherwise the VAT could be blocked.

For partnerships, partners themselves are included, but entertainment provided to their family or clients is not eligible for VAT reclaim.

What Happens If Clients or Non-Employees Attend?

If clients, subcontractors or guests attend a staff event, VAT must be apportioned. You can only reclaim the VAT that relates to the employee portion of the cost. For example, if 20 people attend a dinner and only 15 are employees, only three-quarters of the VAT can be claimed.

Keep records of the attendance list and itemised invoices to support your claim in the event of a VAT inspection.

Final Thoughts

You can usually reclaim VAT on staff entertaining in the UK, provided the entertainment is genuinely for employees and serves a business purpose. Directors and partners are treated as employees for this purpose, but you cannot reclaim VAT for guests, clients or non-staff.

Always keep proper records, split costs where needed, and avoid claiming VAT on any personal or private element of the expense. If unsure, speak to your accountant or VAT adviser to avoid mistakes or penalties in your VAT return.