Entertaining Expenses and Tax
At the end of each tax year (5th April) the University is required to submit a P11D form to the Inland Revenue. This is a return that HMRC requires all employers to submit. It is intended to identify any tax liabilities that, because they do not arise from payment of salary through the payroll, are not initially accounted for through the normal PAYE payments.
Where a benefit is identified on a P11D return, the tax due will normally be collected by the Inland Revenue adjusting the employee's tax code in the next tax year.
'Business entertainment' is the provision of hospitality by employees of the University to non-employees in the furtherance of the University's business. The area of entertainment can present difficult issues in respect of taxation. Some costs may be allowable under University policy, but will nonetheless give rise to a potential tax charge. Put simply, ALL ENTERTAINMENT is treated as a taxable benefit unless;
- There are more non-employees than employees at an event. Students are treated as non-employees.
- Entertainment occurs at the University Centre (for which you should ensure the Dept is invoiced to avoid paying VAT). Entertaining in College is taxable.
All claims must give details of those entertained, their institutions and the purpose of the entertainment. Claims lacking this detail will be returned. If the entertaining is taxable it will be reported as follows:
- Where details of those attending are provided then the taxable benefit can be apportioned across the individuals e.g. if 4 employees and 1 visitor enjoyed a meal then each employee would have a taxable benefit of 1/5 of the total bill.
'Staff entertainment'. The costs of any other meals provided to staff, where the business entertainment definition cannot be applied, are liable to tax and must be reported as part of the P11D exercise. The only exemption to this is when the whole Department are invited. Therefore taking your Research Group out for dinner will be a taxable benefit, unless you invite the rest of the Department. Claims for such expenditure will still require details of those entertained.
Full details can be found in Chapter 5b of the University Financial Procedures.