Add an entertainment workpaper to an account

Overview

The entertainment workpaper is used to record the split between fully deductible, 50% deductible and non-deductible entertainment expenses, even when they are all included in one account. It can also be used to calculate GST on non-deductible entertainment, and exclude any prior year adjustments that have been included in the current year. This workpaper is designed to be used for trial balances where journals are not simultaneously posted to source data by TaxLab users, or for tax return only clients.

You don't need this workpaper if:

• Entertainment has already been separated into trial balance accounts for deductible and non-deductible.
• A GST adjustment on entertainment expense has been posted.

In these cases, attach a Permanent different workpaper for any non-deductible accounts.

Add an entertainment workpaper

1. From the entity's tax year summary, in the navigation bar select Workpapers > Accounts.
2. (If relevant) from the Accounts screen select Trial balance.
3. From the Trial balance screen, locate the account that you want to add the workpaper to and in the Workpaper column, select Add workpaper.
4. From the Add workpaper drop-down, select Entertainment. This will add the workpaper to the account and create a link to it directly from the trial balance.
5. Select Entertainment to open the workpaper.  

Using the entertainment workpaper

The entertainment workpaper is used with trial balance accounts that contain multiple types of entertainment expenditure within the one balance (fully deductible, 50% deductible, non-deductible), and where a GST on entertainment adjustment has not already been posted.

1. In the Non-deductible field, enter the total amount (if any) included in that account which is subject to non-deductibility rules.
2. In the 50% deductible field, enter the total amount subject to 50% deductibility rules. Based on what you have entered, the Fully deductible field will populate with the remainder (if any).

The Return section of the screen displays the total entertainment expense to be added back as non-deductible. 

If last year’s GST entertainment adjustment journal has been posted into the current year trial balance, use the Rollover from prior period button to pull through the amount to exclude from the current year calculation. 

The bottom of the screen displays the GST Output Tax which calculates at 15% of this year's non-deductible entertainment expense.

The default tax form disclosure can be updated, and a query, note, or file added if needed.

Troubleshooting

GST on non-deductible entertainment journal has already been processed

If you have already calculated your 50% non-deductible entertainment expenses outside the system, and recorded a journal to return the GST on non-deductible entertainment expense, then you do not need to use this workpaper as the amount on your trial balance will be partially GST inclusive. In your underlying trial balance, split the non-deductible portion of entertainment expense into a separate code, and add a Permanent difference workpaper to it, to mark it all as non-deductible.

Entity is not registered for GST

The entertainment workpaper calculates the amount of a GST adjustment journal, but this amount does not impact the tax calculation in the current year, so can be disregarded if the entity is not GST registered.

In the following year, if the entity is not registered for GST, continue using the workpaper as in the previous year. Do not select Rollover from prior period, as this will import the prior year’s GST adjustment as a permanent difference into the current period Statement of Taxable Income.

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