The season of client shouts and staff Christmas parties is rapidly approaching. In all the seasonal joy it is important not to get carried away and claim expenses that may not be deductible. Claiming entertainment expenses is a minefield that has seen many a taxpayer fall foul of Inland Revenue. Most common entertainment expenses are at least partially personal and as such need to be adjusted accordingly.
There is often an undeniable portion of personal enjoyment in addition to the business aspect of the expense in helping you to retain the staff and customers that generate your income. It is important to understand exactly what expenses are fully deductible and which need to be adjusted. The list below is a few of the common expenses we field questions about and how much of each is deductible.
100% Deductible Entertainment Expenses:
Dinner for team members while working out of town (no client present),
Taxable allowance paid to team members to entertain clients,
Donating food to support a local charitable Christmas dinner/ party,
Golf club membership for senior/ management team members paid for by the company,
Gym membership for any team member paid for by the company,
Refreshments provided to your team at company meetings,
Morning and afternoon tea for your team,
Sponsoring a local sports team (with no material consideration such as tickets in return),
Taking a client to dinner while working out of town (overseas/ out of New Zealand).
50% Deductible Entertainment Expenses:
Drinks for clients or team members on your premises,
Drinks for clients or team members at your local pub,
Christmas party for your team, on or off the premises,
Sponsoring a local sports team, with tickets to games in return (50% of the value of the tickets is not deductible),
Sponsoring a local sports team by providing refreshments or a meal after games,
Taking a client to dinner while working out of town (but still in New Zealand),
Taking a local client out to dinner in town,
Hiring a boat/ launch to entertain clients.
The above lists are by no means exhaustive but are a sample of some of the more common queries we field from our clients about what is or is not a deductible entertainment expense.
If you are ever in doubt, give your accountant a call or ask the friendly team at MBP by calling the office on (07) 378 6655 or emailing your query to firstname.lastname@example.org. We are always ready and willing to help.
This advice is general in nature. Every situation is unique and requires tailored advice. MBP has the expertise to guide you and your business through the process of making informed decisions about all of your tax obligations and responsibilities. If you think you may need a some advice or have been contacted by the IRD and aren't sure how to proceed, talk to our team today by calling 07 378 6655 or email email@example.com