BIM45000 – Specific deductions: entertainment: introduction: contents
S45 Income Tax (Trading and Other Income) Act 2005, S1298 Corporation Tax Act 2009
With certain exceptions (as below illustrations), expenditure on business entertainment or gifts is not allowable as a deduction against profits, even if it is a genuine expense of the trade or business.
The exception also applies to items that, while not part of the ordinary trade, are part of the service which customers expect from that particular trade. For instance, it is customary to supply customers with coffee in the hairdressers, or with refreshments at a casino. Here, so long as the expenditure is not excessive, the cost of the refreshments is included in the overall price that the customer pays.
Similarly, there are instances where a customer purchases a ‘package’ of services which includes an element of entertaining. An example of this is a residential training course that includes meals and social events. Again, all of the services provided have been paid for by the customer and there is no element of free hospitality, so the costs incurred by the provider are not disallowed under the legislation.