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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Specific deductions: entertainment: sales promotion schemes

Timeshare and ‘scratch cards’

Gifts may be offered to customers as part of a sales promotion scheme. These are not business entertainment if there is a genuine obligation upon the customer to provide something substantive in return. This is under the concept of ‘proper and sufficient quid pro quo’, see BIM45014.

For instance, a trader may offer gifts to customers as an incentive to attend a demonstration of their products. This is particularly common in the timeshare industry, where cash or other gifts are offered to customers on condition that they supply certain personal details and sit through a sales presentation. Here there are obligations on both sides. The trader is obliged to provide the ‘gift’ once the conditions have been met and the customer is obliged to make a commitment in terms of time and personal information. So long as the reward is not excessive in terms of the task performed, you should not treat it as disallowable business entertainment.

Another form of sales promotion is the issuing of ‘no purchase necessary’ scratch cards or similar items. The card itself may be regarded as a business gift, as the customer does not provide anything in return. However, the value of each individual card relates only to the probability of its being a winner - in most cases this brings it within the exemption for small gifts. For further information on competition prizes see BIM45075.