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HMRC internal manual

Business Income Manual

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Specific deductions: entertainment: accommodation provided for non-employees

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

The same broad principles apply as for food and drink

The rules for provision of accommodation to non-employees are similar to those for provision of food and drink (see BIM45045). The cost of ordinary accommodation for people directly involved in the trade is not disallowable under the legislation, but accommodation provided for other people is business entertainment and is not allowable.

You should not treat the cost of accommodation for outside workers (for example, tradesmen engaged on repair work) as business entertainment because they are directly involved in the business and because the accommodation can be regarded as part of the price paid for the work undertaken. However, accommodation provided for visiting suppliers is disallowed under the legislation because they only have an indirect connection with the business and the expenditure incurred is hospitality.

Some traders maintain their own accommodation to be used by guests. This might be a company flat, a house or purpose built accommodation. Where the accommodation provided falls within the definition of business entertainment then the running costs are disallowed by the legislation. Similarly, capital allowances are not available on any of the fixtures and fittings included in the accommodation (see CA27200). You should apportion the expenses by reference to relative usage where the accommodation is used both for staff (and other persons engaged in the trade) and for business entertainment.

For details of accommodation expenditure incurred in relation to training courses, see BIM45047.