The Power of Networking
Networking is one of the most valuable ways of growing a business – particularly for start-ups – but it can come at a cost due to the nature of the expense incurred.
Help is at hand though, because although networking expenses can add up to a significant monthly cost, tax relief is available for certain networking activities – a vital piece of information that all start-up businesses need to know about as they look to stabilise their business and nurture their cash flow.
Conversely there are certain types of networking expenditure that are never deductible for tax purposes, such as business entertainment and expenses that have not been incurred wholly and exclusively for the purposes of the business.
It is critical therefore to understand the types of expenses that attract tax relief and those that do not – we’ve outlined the main types of expenses that can receive tax relief below:
- Membership fees for business networks – such as your local Chamber of Commerce
- Costs associated with attending an event – such as travel and subsistence
- Promotional stands and other equipment used to advertise the business
- Fees associated with hosting an event – such as venue hire and food
- The cost of free samples relating to the nature of the business given to the general public
- The cost of promotional materials and small gifts advertising the business – such as diaries
- Cost of sponsoring a local event, providing this does not amount to business entertainment
- Discounts for the businesses products or services offered at networking events
As noted above, business entertaining and other costs not incurred wholly and exclusively for the purposes of the business are expressly disallowed for tax purposes. Examples of those types of expenses would include:
- Membership fees, or other expenses where the purpose is to entertain guests – such as gold or hotel clubs
- Gifts of food, drink, tobacco, or vouchers that can be exchanged for such goods.
- The cost of all gifts made to the same person where the cost of those gifts exceeds £50 in the year.
Further technicalities and compliance requirements can arise where and Employer reimburses the networking and other advertising costs borne by Employees themselves, or meets those costs directly.
The UK tax system is a complex one, making money-saving efforts extremely difficult, which is why it’s important for businesses to have a tax advisor on hand to help you identify ways of saving some cash to invest in other areas.
It would be prudent to plan out your company’s networking activities for the short and medium term, and before you commit to any, present your plans to a tax advisor to get a true understanding of how much it will cost the business versus what it will potentially yield in the long-term.
For more information about ways that your business can obtain tax relief, contact your local Baldwins office by visiting www.baldwinsaccountants.co.uk