Income Tax (Trading and Other Income) Act 2005

Business entertainment and gifts

867 Business entertainment and gifts: non-trades and non-property businesses

(1) This section applies for the purpose of calculating profits or other income charged to income tax which arise from the carrying on of a business.

(2) For this purpose “business” does not include—

(a) a trade, profession or vocation, or

(b) a property business,

but see subsection (7).

(3) The general rule is that no deduction is allowed in calculating the profits or other income for expenses incurred in providing entertainment or gifts in connection with the business.

(4) A deduction for expenses which are incurred—

(a) in paying sums to or on behalf of an employee of the person carrying on the business, or

(b) in putting sums at the disposal of an employee of that person,

is prohibited by the general rule if (and only if) the sums are paid, or put at the employee’s disposal, exclusively for meeting expenses incurred or to be incurred by the employee in providing the entertainment or gift.

(5) The general rule is subject to—

• section 46 (business entertainment: exceptions), and

• section 47 (business gifts: exceptions),

which apply in relation to a business as they apply in relation to a trade (but as if the reference to a basis period were to a tax year).

(6) For the purposes of this section and those two sections as so applied—

(a) “employee”, in relation to a company, includes a director of the company and a person engaged in the management of the company,

(b) “entertainment” includes hospitality of any kind, and

(c) the expenses incurred in providing entertainment or a gift include expenses incurred in providing anything incidental to the provision of entertainment or a gift.

(7) Provision corresponding to that made by this section is made by—

(a) sections 45 to 47 (in relation to trades, professions and vocations), and

(b) section 272 (in relation to property businesses).