One of the most misunderstood business deductions is the “meals and entertainment” claim. Either people forget to save their receipts and don’t claim it at all, or they treat their whole party because it’s a business write-off.
The basic rule is that if you are paying for meals or entertainment with your clients, you are able to deduct of to 50% of the total cost – including tax and tips. CRA’s website lists the following examples of allowable expenses.
- meals eaten with customers
- the cost of tickets for a theatre, concert, or athletic event, or other performance
- the cost of private boxes at sports facilities
- the cost of room rentals to provide entertainment, such as a hospitality suite
- the cost of cruises
- the cost of admissions to fashion shows
- the cost of entertaining guests at clubs (night, athletic, social, and sporting), as well as on vacation and similar trips
- taxes, gratuities, and cover charges are included in entertainment expenses
As you can see, this is much more than paying for lunch for a client. A wide variety of expenses can be claimed, as long as the taxpayer is able to demonstrate that the expense was “incurred for the purpose of earning income.” You must keep a record of the names of the customers being entertained in order to validate the deduction. A note in your calendar or a name on the back of the receipt would usually be enough to satisfy most auditors.
The one category of expense that is specifically denied (to the dismay of a few of our accountants) is anything related to golf. Club dues, green fees, and even meals at the clubhouse are disallowed. So, if you are going out for a meeting with a client, you can deduct a round of drinks but not a round of golf.