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HMRC internal manual

Business Income Manual

Specific deductions: entertainment: travelling costs

S45 Income Tax (Trading and Other Income) Act 2005, S1298 Corporation Tax Act 2009

Travel incidental to the provision of entertainment is not allowable

Although ordinary travel in itself is not business entertainment, travelling costs incurred in connection with business entertaining are not an allowable expense. This is because they are ‘incidental’ to the provision of entertainment (see BIM45020).

For example, if a company pays for its customers to travel to a sporting event then the cost of the travel is not allowable. On the other hand, the company may claim a deduction for transporting customers to an event that does not include any element of entertainment.

Often the event to which travel is provided will include a mixture of business and entertaining and so you must establish the primary purpose of the event. If the main purpose is work-related (for example a press conference at which drinks and light refreshments are provided) then the travel is not incidental to business entertainment and is allowed as a trading expense. However, if the main purpose is to provide entertainment then the travel is incidental expenditure and is not allowable. An example of this is a social weekend during which a presentation on the company’s products takes place.

There may be occasions where the travel provided is not normal travel from one place to another but is actually a part of the hospitality provided. An example might be a trip on the Orient Express. Here the travel is hospitality in itself, whatever the purpose of the event at the end of the journey.

Employees’ travelling costs may present particular problems. The entertainment of employees is not business entertainment unless it is incidental to entertainment provided for others (see BIM45033 - BIM45034). For example, where an employee travels in a taxi with a customer prior to lunch at a restaurant then the whole of the taxi fare is incidental to business entertainment and is not allowable. However, provided the expenditure is for business purposes, the cost of the employee travelling alone to meet the customer at the restaurant is allowable. Here the travel is incidental to the employee’s requirement to be at the restaurant and not to the entertainment itself.