Hospitality and entertaining expenses: departmental guide

What expenses can be reimbursed for entertaining socially or for business, with University colleagues or others

All hospitality and entertaining expenses must be in accordance with the four mandatory Principles. 

 

Expenses Principles Logo. 1: value for money. 2: cannot pay directly. 3: no personal benefit. 4: evidence required.

  1. Value for money is achieved.

  2. Expenses should only be used when it is not possible and/or practical for the University to pay for the good or service directly.

  3. Costs incurred are for business purposes only, and the individual does not receive a personal benefit.

  4. Only actual and evidenced costs are reclaimed.

 

The costs for hospitality and entertaining should be, and be seen to be, reasonable, in line with the value for money principle, and should not create a personal benefit. Government and some funders view hospitality and entertainment as a personal benefit and therefore will not refund the costs. Wherever possible, departmental guidance should be sought before incurring any costs.

 

All hospitality and entertaining expense claims should be supported with a valid reason for the claim, evidenced with supporting receipts or proof of purchase. Photocopies of receipts are acceptable when the bill has been split between colleagues.

 

Expense claims should be properly recorded on the expense claim with a valid reason for the claim and evidenced with ALL of the following information: 

  • supporting receipts, invoices or proof of purchase; and
  • the names of ALL attendees, including University personnel and students; and
  • the organisation each attendee represents; and
  • the purpose of the entertainment

Entertainment is the provision of free or subsidised hospitality and includes:

  • food and drink
  • accommodation
  • theatre and concert tickets
  • sporting events and facilities
  • entry to clubs and nightclubs
  • payments to third party business entertainment organisers
  • business gifts
     

Note:

Entertaining does not include meals and refreshments taken when travelling on University Business: this is classed as subsistence.

 

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Expenditure on food, drink or other hospitality should only be reimbursed if the department is satisfied that it was incurred in the course of departmental or University business.

Important considerations for acceptability:

  1. If external guests had not attended, would the event still have taken place? 
  2. Is there an appropriate ratio of external guests to Oxford members?
  3. Have all attendees’ names and organisations been recorded?
  4. Is the alcohol consumption reasonable?
  5. Is the cost per head reasonable?

It is also important to check for any entertainment patterns taking place (monthly dinners, weekly drinks, etc) to ensure all claims are reasonable, appropriate, and solely for University business purposes in accordance with Principle 2, and no personal benefits are received.

Examples of what can and should not be claimed as business entertainment include:

 

þ Cost of dinner/drinks with a potential funder or collaborator etc. Under Principle 3, the cost is for business purposes to develop further University business.
þ Cost of lunch with an external examiner. Under Principle 3, the cost is for business purposes.
þ Private dinner in a college to welcome new students. Under Principle 3, the cost is for business purposes.
þ Evening drinks reception at the start of a new course, or in association with lectures or seminars. Under Principle 3, the cost is for business purposes.
þ Cost of student dinners, museum entrance tickets, and occasional social group activities etc, for post-graduate students. Under Principle 3, the cost is for business purposes.
ý Should not be claimed. Activities and entertaining for any political events. Under Principle 3, this is not business hospitality or entertainment. The University must be and be seen to be, politically neutral.

 

Entertainment costs for University personnel for events that occur on a regular basis (such as Christmas parties) that are open to all departmental staff may be reimbursed as long as they do not exceed a maximum cumulative spend of £150 per person in any given tax year.

All other non-business entertainment expenses are classed by HMRC as a personal benefit and the value of the entertainment will be subject to tax and National Insurance for each attendee.

Examples of what can and should not be claimed as non-business entertainment:

 

þ Annual department Christmas/Summer party. Under Principle 1, the cost is reasonable for University purposes. This is accepted by HMRC as reasonable for a regular event where total cost per head is less than £150 in any tax year.
ý Should not be claimed. In-house hotel movies or spa costs while travelling on University business. Under Principle 3, a personal benefit is received.

When entertaining, all costs incurred must be in line with the four principles:
 

Expenses Principles Logo. 1: value for money. 2: cannot pay directly. 3: no personal benefit. 4: evidence required.

  1. Value for money is achieved.

  2. Expenses should only be used when it is not possible and/or practical for the University to pay for the good or service directly.

  3. Costs incurred are for business purposes only, and the individual does not receive a personal benefit.

  4. Only actual and evidenced costs are reclaimed.

Important considerations should be made for the following:

 

Area           Consideration Mitigation                  
Cost

Is the cost excessive or unnecessarily wasteful?

Can the event be paid for directly by the University?

Keep costs reasonable and proportionate to the situation.

Check P2P or use Department Credit Card.
Scale Is the entertainment overindulgent for the level and number of people attending? What would the public perception be of the entertaining? Adjust event organisation to be proportionate and avoid excessive extravagance.
Alcohol Is the type of alcohol appropriate for the entertainment? Will the quantity consumed or the cost be considered excessive? Could the quantity consumed have a negative effect on the conduct of University business? Alcohol provision should be reasonable and proportionate to the situation for all attendees to maintain effectiveness.

 

Refreshments and working meals should be arranged and paid for directly by the department wherever possible however, they may be claimed through the expenses process where required.

Light refreshments (tea, coffee and biscuits) may be provided before, during and after a meeting and reimbursed through expenses.

The cost of sandwiches, lunches or other types of working meal should only be claimed where it meets ALL of the following requirements:

  1. the refreshments are an integral part of the meeting; and
  2. a copy of the agenda, notes or action points are retained for HMRC auditing purposes; and
  3. the meeting takes place in an appropriate location:
    • If meeting attendees are all University personnel, the meal should take place on University premises (not colleges);
    • If meeting attendees are both University and external personnel, the meal can take place on or off University Premises (including colleges); and
  4. alcohol is NOT consumed.
     

Important Notes:

  1. A meal taken immediately after a meeting or including alcohol, is considered to be entertaining and not a working meal.
  2. College premises are NOT considered to be University premises.
  3. Hospitality and entertainment events that take place off University premises and only include University personnel are classed as non-business (social) entertaining and each attendee is subject to tax and National Insurance on the value of the entertainment.

Examples of what can and cannot be claimed as a working lunch:

 

þ Cost of non-alcoholic beverages, sandwiches and other sundries for a working lunch with visiting professors within department premises without catering facilities. Under Principle 3, the cost is incurred for business purposes only.
ý Should not be claimed. Cost of lunch at a college for departmental staff to get together. Under Principle 3, a personal benefit is received. The lunch is not considered business entertaining as there are no external guests present and no agenda. As it is taking place off-site, it is not classed as a business meeting.
þ Cost of buffet lunch during one day industry meeting/workshop meeting held off site in London. Under Principle 3, the cost is incurred for business purposes only.
ý Should not be claimed. Cost of lunch including wine, at nice restaurant with departmental staff to continue meeting discussion over lunch. Under Principle 1, this is not value for money and under Principle 3 a personal benefit is received. Inclusion of alcohol means the claim is not acceptable as working lunch. This lunch is not considered business entertaining as there are no external guests present.

Service charges or tips should only be paid where they relate to an allowable business meal at a reasonable level.  The University rate for reasonable tips is 15% (rounded up to the nearest pound). However, different countries may require other considerations. Any expense claims with tips over 15% must include a reasonable explanation as to why such a percentage/cost of tip was considered necessary.
 

Note:

Authorised signatories should be satisfied with this explanation BEFORE approving the expense claim. If a regular pattern emerges over time, the payment should be declined.

 

It is the responsibility of each department to understand the tax implications to both the individual claimant and the department if they choose to accept the tax and National Insurance charge on the individual’s behalf for entertainment purposes.

Departmental Note:

For non-business entertaining that is deemed a taxable benefit, where the department is willing to pay the tax on behalf of the claimant the expense should be processed via SAP Concur, where the claimant will pay the tax they should complete the Taxable Benefits Expense Claim form.

 

Examples of non-business entertaining that should be pre-approved by departments include:

  • a private dinner in a college with selected members of a University department;
  • drinks with colleagues in the pub after work;
  • a dinner or event to mark the completion of a project that is only open to the participants in that project.

Under principle 3, as the cost is not for business purposes, these costs are classed by HMRC as a personal benefit. If the department agrees to cover the tax and National Insurance for all attendees, it is responsible for paying all additional ‘grossing-up’ tax charges against the total value of the event.

Case Study Example - Departmental tax cost

To mark the successful completion of a three year project, a University department has decided to celebrate by taking the project team of 12 to dinner. The cost comes to £750 and will be claimed through the expenses process which, under HMRC regulations, is taxable. Each member of the project team is an additional rate tax-payer (45%) and the department has agreed to cover the tax and National Insurance costs. The tax for this payment will be calculated and charged under the PAYE Settlement Agreement the University has with HMRC, to cover the tax and National Insurance due for each person.

On departmental approval, the claimant will receive the reimbursement and not be out of pocket however, the TAX CHARGE to the Department will be £128.18 per person. So the department will be paying for the cost of the meal at £750 AND the additional required tax and National Insurance payment of £788. This is a total cost to the department of approximately £1,538 for the celebratory meal.

 

If an individual receives a personal benefit through University entertainment, the value of the benefit is liable for income tax and National Insurance under HMRC regulations.
 

Case Study Example - Individual tax cost

Genevieve and Paul decide to go to into Oxford for lunch. They order wine with their meal and as they are discussing details regarding their research project, decide to split the bill of £36 and claim the cost of lunch as a business expense. The cost of the meal is £18 each, and both individuals are basic rate tax payers.

As the meal is classed as a personal benefit under HMRC regulations, Genevieve and Paul will have to pay tax and National Insurance on the cost of the meal of £5.76. This means that Genevieve and Paul will only receive £12.24 each from their £18 expenses claim.

The tax charge is calculated on the individual’s tax code and any tax and National Insurance owed will be deducted from the individual through Payroll.

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