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“Contractors can certainly claim expenses for business-related entertainment,” explains James Abbott, head of tax at contractor accountant Abbott Moore LLP. “However, their limited company won’t be able to claim corporation tax relief for entertainment-related costs.”

“But common sense should prevail; trying to claim for a £14,000 lunch is likely to draw unwelcome attention from HMRC.”

http://www.contractorcalculator.co.uk/contractor_claim_expenses_entertainment.aspx

I just checked with our accountants. Although we are a "proper" company, lots of people, not a contractor's services company. If I take clients out*, and buy them luch, I can claim it, as an expense, and so can the company, against tax.

Your quote refers to contractors - are they and their companies subject to slightly different rules.

• Never ever happens.