Mixing golf and business

For many, combining business and golf is the very best in multi-tasking. What better way to build a relationship with a client, a prospect, or even a co-worker than with four hours of recreation in a private, outdoor setting?

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But there’s a downside to doing business on the greens. The Income Tax Act contains very strict rules about business deductions when golf and entertaining clients are involved and the Canada Revenue Agency is duty-bound to apply them in all appropriate tax situations. Here, Chartered Accountant Frédéric Pansieri of Soberman LLP and Chartered Accountant Sam Lieberman, MBA, both of Toronto, provide smart tips for people who want to play golf with business associates and play by the tax-deduction rules, as well.

Forgo the green fees and the cart rentals

These are non-deductible, regardless of who’s playing and their relationship to you.

Eat, drink and remember the 50 per cent rule

Unlike green fees and other costs related directly to the game, you can deduct a portion of the food and beverages you purchase at a golf facility when you entertain clients there. In most cases, the maximum is 50 per cent.

Employees are business associates, too

The golf-specific expenses won’t make the cut. But 100 per cent of the cost of meals will be deductible if all the employees of an employer’s particular place of business are eligible to attend the function, and such events don’t take place more than six times a year. Otherwise, it’s 50 per cent.

Make an exception for charity

A company tournament for a charitable cause offers some special tax considerations. The primary purpose of the event must be fundraising to benefit a registered charity, which provides you or your company with a receipt that excludes the value of the green fees and cart rentals. Depending on how the tournament is structured, up to 100 per cent of the cost of meals may be deductible.

Don’t neglect your record keeping

The CRA expects you to be able to substantiate any expenses or deductions. Whether it’s two clients for a round of golf and a beer in the clubhouse, or the entire company for a tournament, you must keep track of who attended, when, and what their relationship is to you or the organization.

Taxable benefits sometimes count

Companies have been known to buy or pay for things – for example, club memberships or vehicles – that can constitute a taxable benefit to the employees who use them or receive the benefit of them. The rules, circumstances and conditions that determine deductibility are complicated. Consult your Chartered Accountant about your particular case.

Conferences can stretch the limits

If golf is combined with another legitimate work activity, such as a conference or training session, all the non-golf expenses related to that activity may be deductible. That includes room rental, meals and any travel costs. Of course, the 50 per cent rule still applies to entertainment and associated meals – even if they’re not related to golf – and the CRA must be satisfied that the expenses you claim are reasonable under the circumstances.

Take advantage of the chance to advertise

Golf tournaments in which your clients are playing can offer great marketing opportunities for the company. Give-away golf balls with the company logo, T-shirts, golf caps; even banners and signs can all be considered promotional items. As such, the costs are legitimate business expenses, and 100-per-cent deductible. Brought to you by the Institute of Chartered Accountants of Ontario