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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Particular benefits: third party entertainment: interaction with Section 356 ITEPA 2003: liaison with accounts office

Section 356 ITEPA 2003

Section 356 ITEPA 2003 prohibits a deduction for most business entertaining in calculating business profits (see generally BIM45000 onwards). Business entertaining is defined as “entertainment (including hospitality of any kind)” - the same words used in the employment income exemption. Thus it is likely that in most cases where an employee is entitled to exemption in respect of entertainment provided by a third party, the provider will not be able to deduct the cost of that entertainment in calculating his profits.

Make a report to the office dealing with the accounts of the person or company providing the entertainment in any case where you admit exemption for third party employees under EIM21836 and EIM21837.