In most cases, a VAT-registered business cannot reclaim VAT on client entertainment. HMRC blocks input tax recovery where free hospitality is provided to UK business contacts. The rule covers more than restaurant bills: it can also apply to drinks, hotel accommodation, event tickets, sporting facilities and other hospitality.
This guide explains the position for the 2026/27 tax year, the limited exceptions, and how to separate client entertainment from employee subsistence or staff entertainment.
What counts as client entertainment for VAT?
HMRC treats hospitality as business entertainment when it is provided free to someone who is not an employee of the business. Common examples include:
- taking a client or prospective client to a restaurant;
- providing alcoholic drinks after a meeting;
- corporate hospitality at a sporting event;
- theatre, concert or nightclub tickets;
- hotel accommodation provided as hospitality; and
- golf days, track days and similar events.
The fact that the expenditure is intended to win work, maintain a commercial relationship or promote the business does not normally make the VAT recoverable. For UK clients and prospective clients, the input tax block generally applies even where the cost has a clear business motive.
When can VAT be reclaimed?
There are limited situations in which VAT may be recoverable.
Basic refreshments during a business meeting
Basic food and non-alcoholic refreshments provided at the business premises so that a meeting can continue without interruption may be treated differently from entertainment. HMRC gives sandwiches and soft drinks as examples. Hospitality after the meeting, alcohol or a restaurant meal is much more likely to fall within the blocked entertainment rules.
Entertainment of overseas customers
VAT incurred when entertaining an overseas customer may be recoverable if the expenditure is reasonable in scale and character and is incurred for a strict business purpose. However, an output tax charge may arise where the individual receives a private benefit. HMRC says that hospitality provided merely because it is polite, expected or useful for improving relationships does not meet the strict-business-purpose test.
Costs with mixed business uses
If goods or services are used partly for entertainment and partly for another business purpose, only the entertainment element is blocked. The business should use a fair and supportable method to apportion the VAT, subject to the normal partial-exemption rules where relevant.
Client entertainment versus staff entertainment
Client entertainment should not be confused with staff entertainment. VAT on a genuine staff party, team-building event or staff outing can normally be recovered where the event is provided for employees for a business purpose.
Important restrictions still apply:
- entertainment provided only to directors, partners or a sole proprietor is normally not recoverable;
- where employees attend an event as hosts for clients, the part attributable to the clients is blocked;
- where an event includes employees and non-employees, the VAT must normally be apportioned; and
- employee travel and subsistence are governed by separate rules and are not automatically business entertainment.
For broader registration and recovery rules, see our guides to who can reclaim VAT and the difference between input and output VAT.
Examples
Example 1: lunch with a UK client
A VAT-registered consultancy pays for lunch with a UK client to discuss a future project. Even though the meeting may generate taxable business income, the VAT on the client’s meal is normally blocked as business entertainment.
Example 2: sandwiches during an office meeting
A company provides modest sandwiches and soft drinks at its office so that a working meeting can continue. If the refreshments are basic and genuinely incidental to the meeting, HMRC’s guidance indicates that a private-use charge should not apply. The facts and supporting invoice should be retained.
Example 3: annual staff party with clients
Employees and several clients attend the same event. The business may recover the proportion of input tax attributable to its employees, but the client element is normally blocked. A reasonable headcount or cost-based apportionment should be documented.
Records to keep
Keep the VAT invoice together with the date, attendees, their relationship to the business, the purpose of the event and the method used for any apportionment. These records help demonstrate why VAT was claimed or excluded if HMRC reviews the return.
Frequently asked questions
Can I reclaim VAT on a client’s restaurant bill?
Usually not. A free restaurant meal for a UK client or prospect is normally blocked business entertainment.
Can I reclaim VAT on coffee during a client meeting?
Potentially, where modest refreshments are provided at the office solely to allow a working meeting to continue. The treatment is fact-specific, particularly where alcohol, a restaurant or hospitality after the meeting is involved.
Does charging the client change the position?
The business-entertainment definition considered here concerns entertainment supplied free of charge. If the client is charged, the VAT treatment can differ and should be considered as part of the business’s taxable supplies.
Is VAT on staff entertainment recoverable?
It can normally be recovered for genuine employee entertainment provided for a business purpose, subject to special rules for directors-only events and costs attributable to non-employees.
Official source
HMRC’s current position is set out in Business entertainment (VAT Notice 700/65), last updated on 3 June 2026. Because the result depends on who attended, why hospitality was provided and whether any private benefit arose, obtain professional advice for material or unusual expenditure.
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