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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Dispensations: entertaining expenses


The guidance on this page applies for the tax years up to and including 2015-16.  For tax years 2016-17 onwards dispensations have been replaced by an exemption for amounts which would otherwise be deductible. See EIM30200 onwards.

Subject to EIM30055 give a dispensation in respect ofreasonable entertaining expenses incurred at genuine business occasions by subordinateemployees. In general, it will not be appropriate to grant a dispensation in respect ofthose employees who are in a position to authorise their own entertaining expenses. But,as with other expenses, apply discretion here. For example, a salesman may be able toentertain customers without receiving prior specific authorisation. Provided the salesmanis only allowed to entertain customers or potential customers on occasions where the mainpurpose is to discuss business, there is no objection to granting a dispensation inrespect of the salesman’s expenses unless liability will arise on the employee underSections 356 to 357 ITEPA 2003, see EIM32585 onwards.

The following can usually be regarded as reasonable and genuine business occasions:

  • genuine product launches
  • lunches etc for customers or potential customers at which business is discussed
  • reasonable entertaining at exhibitions etc at which products are on display for customers.

Refuse a dispensation where there is any doubt whether particular items of entertainingfor which the employer would like a dispensation would be fully allowable to the employeeas an expenses deduction under Sections 336 to 338 ITEPA 2003. In particular adispensation will not be appropriate for entertaining expenses where:

  • they are provided as an incentive or a reward to staff, or
  • liability will arise on the employee by virtue of Sections 356 to 357, which relate to the disallowance of business entertaining expenditure (see EIM32585 onwards).