Key takeaways
- Client entertainment is not deductible for Corporation Tax or income tax, even when it has a genuine business purpose.
- The ban is in section 1298 of the Corporation Tax Act 2009 for companies and section 45 of ITTOIA 2005 for sole traders and partnerships.
- If an employee takes a client to a restaurant, the whole bill, including the employee's meal, is disallowed.
- Entertaining your own staff is deductible, unless it is incidental to entertaining clients.
- Client entertainment paid for or reimbursed by the employer goes on form P11D, but no tax or National Insurance is due on it.
- VAT on entertaining UK clients is blocked; entertaining overseas customers is the main exception.
- Assets used for business entertainment, such as a hospitality box or yacht, do not qualify for capital allowances.
Client entertainment is not tax-deductible in the UK. That applies to limited companies, sole traders and partnerships, and it applies even when the lunch or event wins you work. The VAT is usually blocked as well. Entertaining your own staff is the main exception.
Why is client entertainment not deductible?
The law disallows it outright. Section 1298 of the Corporation Tax Act 2009 says “no deduction is allowed” for business entertainment and gifts, and that entertainment “includes hospitality of any kind”. Section 45 of the Income Tax (Trading and Other Income) Act 2005 has the same rule for sole traders and partnerships.
HMRC’s BIM45000, updated 4 August 2026, confirms the costs are disallowed even when they are a genuine business expense. Assets used for business entertainment also do not qualify for capital allowances.
What counts as entertainment?
Entertainment means any free hospitality. Common examples are:
- meals and drinks with clients or prospects
- tickets to sporting events, concerts or the theatre
- corporate hospitality boxes and golf days
- hotel stays for guests
- drinks receptions and launch parties for contacts
Client gifts fall under the same section. Our guide to Christmas gifts for staff and clients covers the small branded gift exception.
Is the employee’s share of a client lunch deductible?
No. HMRC’s BIM45034 says that when an employee takes a customer to a restaurant, “the whole cost of the lunch for both the employee and the customer is business entertainment and is not allowable”.
HMRC’s test is whether you would have paid for the event if no guests had been there. If not, the staff share is incidental to entertaining guests and is also disallowed.
What entertainment is deductible?
| Cost | Deductible? |
|---|---|
| Staff Christmas party | Yes |
| Lunch with a client | No |
| Client’s meal in the staff canteen | No (the employee’s meal is) |
| Golf club membership for a salesperson | Yes, but a P11D benefit |
| Entertainment sold to paying customers | Yes |
Three exceptions do most of the work:
- Staff entertainment. Entertaining your own employees is allowable. See the £150 staff party exemption for the employee tax side.
- Benefits that encourage networking. A golf subscription for a member of staff is deductible for the employer, but it must go on the employee’s P11D.
- Entertainment you sell. A hotel or restaurant can deduct the cost of meals it sells to customers in the normal course of trade. Free hospitality for non-customers is still disallowed.
How do you report client entertainment for employees?
It depends on whether the entertainment is for business. GOV.UK sets out these rules.
- Business entertainment of clients: report the cost on form P11D. You do not deduct or pay any tax or National Insurance.
- Non-business entertainment you arrange and pay for: report on P11D and pay Class 1A National Insurance.
- Non-business entertainment the employee arranges and you pay the supplier: add it to earnings and deduct Class 1 National Insurance, but not PAYE.
- Non-business entertainment the employee pays and you reimburse: the payment is earnings, so deduct PAYE and Class 1 through payroll.
On the P11D, tick the entertainment box if the cost will be disallowed in your tax calculation. See benefits in kind and the P11D.
What about VAT on client entertainment?
VAT on entertaining UK clients, and non-UK contacts who are not customers, is blocked. Overseas customers are the main exception, but the hospitality must be reasonable and a private use charge can cancel the claim. Full details are in our guide to VAT on staff parties and client entertainment and in VAT Notice 700/65.
Which applies to you?
- If you are a sole trader taking a client for dinner: not deductible, and no VAT reclaim.
- If your company hosts a client golf day: not deductible; VAT blocked for UK guests.
- If your team has a Christmas party with no guests: deductible, and VAT reclaimable.
- If staff bring clients to the team party: the client share is disallowed.
- If you pay for a director’s personal dinner with friends: that is non-business entertainment and a taxable benefit.
What to do now
- Keep client entertainment in its own nominal code so it is easy to add back.
- Add the total back in the Corporation Tax computation on your CT600, or in the disallowable column of a Self Assessment return.
- Record who attended each event, so mixed staff and client events can be split.
- Check expense claims for client meals coded as subsistence.
Frequently asked questions
Is client entertainment tax-deductible for a limited company?
No. Section 1298 of the Corporation Tax Act 2009 disallows business entertainment, so add it back in the Corporation Tax computation.
Can a sole trader claim client lunches as an expense?
No. Section 45 of ITTOIA 2005 applies the same ban to sole traders and partnerships.
Is my own meal deductible when I take a client out?
No. HMRC treats the whole bill, including the employee’s or owner’s share, as business entertainment.
Is staff entertainment tax-deductible?
Yes, as long as it is not incidental to entertaining clients or other guests.
Do I need to put client entertainment on a P11D?
Yes, if you pay for or reimburse an employee’s business entertainment of clients. No tax or National Insurance is due on it.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 6 November 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.