There was a distinction, years ago, for VAT between expenditure on entertaining UK customers and entertaining overseas customers. Input VAT could be reclaimed only on the cost of entertaining overseas customers.  That  distinction was dropped subsequently, in January 1993, and input VAT on all business entertaining was blocked.

HM Revenue & Customs are reviewing currently the input VAT treatment of business entertainment provided to overseas customers in the light of a recent European Court of Justice judgment in two adjoined tax cases.

HM Revenue & Customs will now allow businesses to submit claims in order to protect their position for input VAT incurred on the cost of entertaining overseas customers, pending a statement by HM Revenue & Customs of their position.

Claims should be within the normal time limits for claims. The standard time limit is three years from the end of the VAT quarter in which the VAT input was incurred. However, input tax not claimed for periods ended before 1st May 1997 may now also be claimed if the claim is submitted before 31 March 2009.

HM Revenue & Customs have stated that any claims submitted should, as a minimum, include:

• details of the overseas customers (overseas suppliers are not covered);
• the type of expenditure (e.g. meals, drinks, sporting event);
• the amount of VAT claimed; and
• evidence to support the fact that the VAT had not been deducted previously.

Please let us know if you would like any further explanation or if we can be of any assistance in putting together suitable claims.

Frank Upton or Iain Wright