Refreshments

This Overheads code records the cost of refreshments incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Everyday staff refreshments (VAT reclaimable)

A business buys tea, coffee and milk for the office kitchen, invoiced at £48 (£40 net of VAT). Because this is for staff rather than clients, the VAT is reclaimable in the normal way: a debit of £40 to 8205 (Refreshments), a debit of £8 to 2201 (Purchase Tax Control Account), and a credit of £48 to 2100 (Creditors Control Account).

Client entertaining (VAT blocked)

A business takes a client to lunch to discuss a deal, paying £120 including VAT. Client entertainment is specifically blocked from VAT recovery under UK rules, however genuinely business-related the meeting is, so none of the VAT is reclaimable. The whole £120 is a debit to 8205 and a credit of £120 to 2100, with nothing going to 2201 at all. Businesses that entertain clients regularly — professional services, sales-led B2B firms — need to watch for this rather than reclaiming VAT on what looks like an ordinary meal.

Commonly confused with

Because code 8204 (Insurance) sits right next to this one in Overheads & Depreciation, it's a common mis-posting target. Code 8205 is specifically for refreshments, while 8204 covers insurance — similar in nature, but keeping them separate is what makes the overheads & depreciation section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Refreshments won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads & Depreciation