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HMRC internal manual

Employment Income Manual

Exemption for amounts which would otherwise be deductible: entertaining expenses

Subject to EIM30220, reasonable entertaining expenses incurred at genuine business occasions will be covered by the exemption. In general, it will not be appropriate for the exemption to apply in respect of those 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 to entertain customers without receiving prior specific authorisation. Provided the salesman is only allowed to entertain customers or potential customers on occasions where the main purpose is to discuss business, there is no objection to the expense being within the exemption unless liability will arise on the employee under sections 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

The exemption will not apply where there is any doubt whether particular items of entertaining would be fully allowable to the employee as an expenses deduction under sections 336 to 338 ITEPA 2003. In particular, the exemption 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)