UK & Overseas Entertainment, Overseas Travelling & Subsistence: Codes 7403-7406

These four codes round off the travel and entertainment block, and one of them carries a VAT catch worth knowing about: client entertainment is one of the few business costs where the VAT usually can't be reclaimed at all.

The codes, and what each one holds

Code 7403 — U.K. Entertainment records the cost of entertaining clients or contacts within the UK, such as a business meal.

Code 7404 — Overseas Entertainment covers the same kind of cost incurred abroad.

Code 7405 — Overseas Travelling records travel costs specifically for trips outside the UK.

Code 7406 — Subsistence covers reasonable meal and incidental costs for employees travelling on business, distinct from entertaining a client. All four are Overheads codes and normally carry a debit balance.

Real-world examples across industries

Domestic sales team

A sales-driven agency takes a prospective UK client out for dinner to help win new business — a £600 bill posted in full to 7403 (U.K. Entertainment): a debit of £600 to 7403 and a credit of £600 to 2100 (Creditors Control Account), with nothing split out to 2201 because input VAT on entertaining anyone who isn't an employee is specifically blocked, however good the VAT invoice looks. The same rep later visits a site alone and claims £24 for lunch under the company's expense policy — a genuine employee cost rather than client entertaining, so the VAT is reclaimable: a debit of £20 to 7406 (Subsistence), a debit of £4 to 2201, and a credit of £24 to 2100.

Exporter with overseas customers

An exporter takes an overseas customer to dinner in the UK while negotiating a supply contract. Unusually, this sits outside the general block on client entertainment — HMRC specifically excludes reasonable hospitality provided to an overseas customer in the course of business negotiations, so the VAT can be reclaimed in the normal way: a £360 bill (£300 net, £60 VAT) is a debit of £300 to 7404 (Overseas Entertainment), a debit of £60 to 2201, and a credit of £360 to 2100. The same business flies out to visit the client at a cost of £450 — international passenger transport is zero-rated for UK VAT, so even an expensive flight carries nothing to reclaim: a debit of £450 to 7405 (Overseas Travelling) and a credit of £450 to 2100, with nothing posted to 2201 at all.

Why this matters day to day

Confusing entertainment with subsistence is a common and costly mistake, since one is a genuine, VAT-reclaimable staff expense and the other almost always isn't — getting this wrong on a VAT return is exactly the kind of error HMRC checks for. Splitting UK from overseas costs also matters for expense policy and budgeting, since overseas trips typically carry a different cost profile and approval process than domestic ones.