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HMRC internal manual

Employment Income Manual

Particular benefits: third party entertainment: conditions to be satisfied for exemption

Section 265, 266(1) and 267(1) ITEPA 2003

An employee or office holder is exempt from tax on employment income on certain goodwill entertainment, provided by third parties, for him or her for a member of their family or household.

The exemption applies when all the following conditions are satisfied:

  • the person providing the non-cash voucher, the credit-token or the benefit is neither the employee’s employer nor a person connected with his employer (Section 265(3))
  • neither his or her employer nor a person connected with their employer has directly or indirectly procured the provision of the entertainment (Section 265(3))
  • the entertainment is not provided either (Section 265(4)):

    • in recognition of particular services that the employee has performed in the course of his or her employment or
    • in anticipation of particular services that are to be performed by him or her in the course of their employment.

For this purpose “connected with” has the meaning given by Section 839 ICTA 1988.

Incentive awards (see EIM21730) that are related to the achievement of specific targets, or the attainment of specific levels of performance, do not qualify because they do not satisfy the third condition above.