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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Other expenses: entertainment expenses: application of Section 336 to entertainment expenses: circumstances where neither the employer nor the employee can obtain a deduction for entertaining expenditure

Section 336 ITEPA 2003, Section 45 ITTOIA 2005 and Section 577 ICTA 1988

You should not normally tax the same expenditure on entertainment twice. That would be the result if neither the employer nor employee was given a deduction for it (see EIM32585).

But there are circumstances where a double disallowance will arise. For example, an employee may be given a round sum entertainment allowance which is used to entertain members of his or her family who have no connection with the employer’s business. In that situation the employer will not get a deduction because of Section 577 ICTA 1988 or Section 45 ITTOIA 2005. At the same time, the employee will not be entitled to a deduction under 336 ITEPA 2003 because the expenditure is not incurred in the performance of the duties.