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HMRC internal manual

Employment Income Manual

Other expenses: entertainment expenses: disallowance under Section 356 ITEPA 2003: meaning of

Sections 356 and 358 ITEPA 2003

Section 356 applies to expenditure on the provision of entertainment, or a gift.

“Entertainment” includes hospitality of any kind. And the expense of providing the entertainment, or gift, includes expenditure on anything incidental to the provision of the entertainment or gift. For example, the cost of providing a taxi to a theatre or restaurant where guests are entertained counts as expenditure on entertainment for the purpose of Section 356.

Note that Section 356 does not apply to staff entertainment unless the provision of entertainment for them is incidental to its provision for others (Section 358(1)). So the expenses of staff-only functions such as the employer’s staff Christmas party are not within Section 356. But if staff members are called upon to host an entertainment event arranged for the employer’s customers or clients, the entertainment enjoyed by the staff members is within Section 356 because the provision for them is incidental to the provision for the employer’s guests.


Section 356 applies to the provision of gifts in the same way as it does to the provision of entertainment. But there is an exception for “small” gifts (other than food, drink, tobacco or a voucher or token exchangeable for goods) which incorporate a conspicuous advertisement for the donor. “Small” means the cost to the donor does not exceed £50 in total for all gifts to the same person in the same year.