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HMRC internal manual

Employment Income Manual

Other expenses: entertainment expenses: disallowance under Section 356 ITEPA 2003: concerns to which Section 356 applies

Section 356 ITEPA 2003

The first step in deciding if an employee is entitled to a deduction for entertainment expenses is to decide if the employer is carrying on a trade, business, profession or vocation (see EIM32565).

Section 356 ITEPA 2003 applies to the employees of concerns such as:
  • trades
  • professions
  • vocations
  • investment companies

Section 356 does not apply to employees of non-trading concerns such as:

  • the armed forces
  • the Civil Service

Note that it is the type of activity that determines whether Section 356 applies. If the employer carries on a trade, etc, Section 356 will apply irrespective of whether the employer is a company, a sole trader, a partnership or a nationalised industry.

Organisations with mixed trading/non-trading activities

Some organisations may carry on a mixture of trading and non-trading activities. In that case, Section 356 will potentially apply to employees who are engaged in the trading activities of such concerns, but not to those engaged in the non-trading activities.

Obtaining advice

If you are in doubt whether a particular activity constitutes a trade, business, profession or vocation, consult the Inspector dealing with the accounts of the organisation in question.