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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Other expenses: entertainment expenses: disallowance under Section 356 ITEPA 2003: employer not liable to UK tax

Sections 356 and 357 ITEPA 2003

Employees of concerns within Section 356 ITEPA 2003 (see EIM32575) are not able to claim a deduction for entertaining expenses unless those expenses fall to be disallowed in computing the employer’s taxable profits (see EIM32585). However, you will sometimes come across employees of concerns that, for one reason or another, are not chargeable to UK tax on their profits. The way in which Section 356 applies to those employees depends on the reason why the employer is not chargeable.

As regards:

  • employers not resident in the UK, see EIM32595
  • employers whose profits are exempt from tax under the terms of a double taxation agreement, see EIM32600
  • Local Authority and Health Service employers, see EIM32605
  • charities, see EIM32610.

See also EIM32612 regarding employees of tonnage tax companies.