Entertainment Expenses Decoded
Trivial Benefits That Save Your Limited Company Money
If you’re a contractor running a limited company, you’re probably aware of how important it is to keep your tax bill low and your bookkeeping accurate. But, there’s one area that’s frequently misunderstood, and that’s entertainment expenses. Entertainment expenses as a limited company contractor can be tricky, especially when trivial benefits are factored in.
You need to understand what you can claim, and how to do it without upsetting HMRC, and that’s something Go Limited can help you with. With a comprehensive understanding of entertainment expenses and trivial benefits, you can save yourself money each year.
Understanding Limited Company Entertainment Expenses
There’s a lot of things to pay for as a limited company contractor, entertainment expenses included. Though they’re not as important as rent, salaries, raw materials and equipment, they do play a big part in the running of your business, and they quickly add up. When we’re talking about entertainment expenses, we’re talking about the costs your limited company incurs as a result of providing hospitality to clients, suppliers, employees or directors. You might want to wine and dine a client, showing them that you mean business. You might want to treat your employees to a Christmas party, letting them know you value their hard work throughout the year. But, there’s a catch. Not all entertainment is treated equally from a tax perspective, and not all entertainment expenses are tax-deductible.
In the eyes of HMRC, limited company entertainment expenses are split into three categories. There’s client expenses, including meals, drinks, tickets to shows or sporting events, and even business gifts to clients. These aren’t tax-deductible, and they don’t go towards reducing your tax bill. This is because HMRC sees client entertainment expenses as the cost of building goodwill, and not a necessary business expense.
Staff entertainment expenses are also incurred by limited companies, including annual parties, team-building events, celebratory meals and Christmas gifts. These are allowable expenses, but only if they meet certain criteria. For example, staff entertainment is likely to be tax-deductible if the event is a Christmas party open to all staff, and the cost per head is less than £150.
If you’re the sole employee and director of your limited company, you need to be careful, as you don’t want to make a mistake. You can’t entertain yourself in the eyes of HMRC, but you can use some trivial benefits rules to your advantage.
Limited Company Trivial Benefits: What Could You Be Claiming?
If you’ve done any research into limited company expenses, you will have come across trivial benefits. These are small perks or gifts that you can give to yourself, as a limited company director, or to your team without having to worry about paying tax on them. To qualify as a trivial benefit, each benefit must need certain criteria. For example, it has to cost £50 or less per instance, not be cash or a cash voucher, not be a reward for work or performance, and not be part of the employee's terms of employment or contract.
There are various ways to give trivial benefits, but things like a bottle of wine for your birthday, flowers to celebrate a personal occasion, or small gift card for a job well done are all allowable. Trivial benefits can’t be directly linked to performance, and they can’t be given as cash.
If you're the sole director and have no other employees, you can still claim for trivial benefits, but only up to £300 per year. This £300 needs to be split over six £50 benefits and can’t be given in one go. If your business has other employees, there's no annual limit per employee, though the £50 per item rule still applies.
Can You Claim for All Limited Company Entertainment Expenses?
It’s easy to get carried away with claiming limited company expenses, but don’t make the mistake of assuming you can claim for everything. There are a lot of rules, set out by HMRC, about claiming limited company entertainment expenses, and getting things wrong can be costly. This is why a lot of limited company contractors choose to work with a specialist accountant, as doing so gives them peace of mind that they’re not making any mistakes.
How Do Limited Company Trivial Benefits Save You Money?
Trivial benefits can be a legal, tax-efficient way to extract value from your limited company without triggering any tax liabilities. It’s easy to see why trivial benefits are something savvy contractors pay attention to. If you paid yourself £300 as part of your salary - as six times the £50 trivial benefit limit - you could be taxed on a significant part of it. You’d need to pay tax and National Insurance on that amount. But, if you pay yourself the same £300 - in the form of a trivial benefit, not in cash - you don’t lose any of the money, as you keep the entire benefit.
Limited Company Allowable Expenses: Top Tips to Get Things Right
- Plan Staff Events Strategically - To be able to claim limited company expenses on a staff party, you need to plan the event strategically. Keep events below £150 per head - and that includes VAT, travel and accommodation - and though you can hold multiple events throughout the year, the total per person needs to remain under £150 annually.
- Use the Trivial Benefits Allowance - It’s important to make the most of your trivial benefits allowance. Space your trivial benefits out across the tax year, and set a recurring reminder to claim each one. You can claim six times a year at £50, totalling £300 of trivial benefits, but it’s easy to forget. When you’ve got a lot of other things going on - and let’s face it, who doesn’t? - having a reminder set means you don’t miss out.
- Keep Proper Documentation - It’s important to save receipts and log the nature of the benefit if you want to make a claim. Detail who it was for, what it was, the date it was given and why. There’s no knowing if you’ll be investigated by HMRC, but if they do, you’ll need proof of what’s being claimed.
- Never Claim Personal Entertainment - You might be tempted, but don’t fall into the trap of claiming personal entertainment. Meals, holidays or gifts not related to business or employee perks are strictly off-limits, and you could get in trouble for claiming the expenses when you shouldn’t.
FAQs
Trivial Benefits and Entertainment Expenses for Limited Companies
Can I Give an Amazon Voucher as a Trivial Benefit?
You can give gift cards and vouchers as trivial benefits, but only if they’re not cash vouchers. The voucher must be spent on goods, and not exchanged for cash.
Can I Throw Multiple Staff Parties Each Year and Claim Entertainment Expenses?
Yes, you can have multiple staff events - for example, you can throw a summer BBQ and a Christmas party - but the total cost per person must stay under £150 per year. It’s £150 per person, per year, not per party or event.
Can I Treat a Client to Dinner and Claim it as an Expense
You can record the cost as an expense, but it’s not tax-deductible. It won’t reduce your tax bill, as HMRC doesn’t view client dinners as being necessary for the business. But, it’s still worth recording the expense for full transparency and your own records.
What Happens if I Go Over the £50 Trivial Benefit Limit
If you’re not paying attention and tracking your trivial benefits correctly, you run the risk of going over the £50 limit. If the benefit costs more than £50, the whole amount becomes taxable as a benefit and must be reported. This is why it’s important to pay attention to the guidelines, as going over the limit could mean you miss out altogether.
Can All Limited Companies Claim Expenses?
It doesn’t matter what industry or sector you’re in, you’re able to claim expenses as a limited company. However, the expenses you’re likely to have will depend on your sector, so it’s important to know what’s allowable and what’s not.
Trivial benefits and entertainment expenses, when used correctly, can significantly enhance your financial efficiency as a limited company contractor. Though expensive client meals won’t bring tax relief, small perks and strategic staff events can reduce your tax bill and boost your finances, both legally and efficiently. With Go Limited, you’ll have the information you need to plan, record and claim properly, saving your limited company money each year.
How do I put motor expenses through the books for a limited company?
There are two common ways to claim motor expenses:
- Claim mileage – If you use your personal car for business travel, you can claim HMRC’s approved mileage rates (45p per mile for the first 10,000 miles, then 25p per mile). Keep a mileage log and submit claims to the company.
- Company car – If the car is owned or leased by the company, you can put through all running costs (insurance, tax, fuel, servicing) as business expenses. However, this may trigger a Benefit in Kind (BIK) charge for the employee/director, so check with an accountant before proceeding.
Can my limited company pay for train travel?
Yes, train travel costs for business purposes are an allowable expense. Make sure you:
- Keep receipts or digital records
- Only claim for journeys related to work (e.g. travel to meetings, clients, or between sites)
Personal or commuting travel (e.g. home to regular office) is not claimable.
Do I have to record expenses daily if I’m submitting them monthly?
No, you don’t have to record expenses daily, but it's highly recommended to keep records as you go to avoid mistakes or missed claims.
You can submit and reimburse expenses monthly, but be sure to:
- Keep dated receipts/invoices
- Include the purpose of the expense
- Log all entries in your accounting software or spreadsheet
Accurate, timely records make life easier at year-end and during HMRC checks.
How much would I gain by claiming for a laptop through my limited company?
If the laptop is wholly and exclusively for business use, your company can claim:
- 100% of the cost as a capital allowance (Annual Investment Allowance)
- Plus deduct it from profit, reducing your Corporation Tax bill (currently 25% for many small companies)
Example:
A £1,000 laptop purchase could save around £250 in Corporation Tax.
Make sure the laptop is used primarily for business, not personal use, or HMRC may challenge it.
How do I account for accidental personal expenses paid through the limited company?
If you accidentally use the company account for a personal purchase:
- Record it as a director’s loan or drawings
- Repay the amount back to the company
- Avoid claiming it as a business expense — it won’t be tax-deductible
Best practice is to clearly separate personal and business spending to avoid confusion.
I pay for Sky in my pub – can I offset this against Corporation Tax as an allowable expense?
Yes, if your pub uses Sky TV to entertain customers, the subscription is likely a business expense and can be claimed as tax-deductible.
Make sure:
- The Sky account is in the company’s name
- It's genuinely used as part of the customer offering (e.g. sports bar, pub events)
- You don’t include personal use at home under the same subscription
There are only two employees in our limited company – can we expense a Christmas event?
Yes! HMRC allows limited companies to claim annual staff events as a tax-free benefit, if:
- It’s open to all employees
- The cost is £150 or less per person (including VAT and any transport/accommodation)
- It’s a regular annual event like a Christmas party
Even with just two employees, this rule applies — great news for small teams!
What entertainment expenses are allowable for a limited company in the UK?
In general, client entertainment is not tax-deductible, but some exceptions apply:
- Client entertainment (e.g. taking a client to lunch): You can record the cost in your books, but can’t deduct it from profits for tax purposes.
- Staff entertainment: This is usually allowable if it meets HMRC rules (like the Christmas party example).
- Marketing events: If you're providing food and drink as part of a product promotion (e.g. trade shows), those costs may be deductible.
Keep clear records of who attended and the purpose of the event to justify claims.
Important:
Please note: Any rates and thresholds mentioned in this article are correct at the time of publishing and may be subject to change.
When choosing an accountant, look for one with proven experience and expertise in the contracting sector, particularly around areas like IR35, limited company tax matters and off-payroll working. Formal qualifications are important, but relevant hands-on knowledge matters just as much — especially in a complex and fast-changing landscape like this.
