Business entertainment and giftsU.K.
1298Business entertainment and giftsU.K.
(1)This section applies if a company incurs expenses in providing entertainment or gifts in connection with a business which it carries on.
(2)The general rule is that—
(a)no deduction is allowed for the expenses in calculating income from any source for corporation tax purposes,
(b)no deduction is allowed under section 1219 for the expenses, and
(c)expenses to which this section applies are not to be brought into account under section 76 of ICTA (expenses of companies carrying on life assurance business) as expenses payable.
(3)The general rule prohibits the deduction, or the bringing into account, of expenses which are incurred—
(a)in paying sums to or on behalf of an employee of the company, or
(b)in putting sums at the disposal of an employee of the company,
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.
(4)The general rule is subject to exceptions—
for entertainment (see section 1299), and
for gifts (see section 1300).
(5)For the purposes of this section and those two sections—
(a)“employee” 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.
1299Business entertainment: exceptionsU.K.
(1)The prohibition in section 1298 on deducting, or bringing into account, expenses incurred in providing entertainment does not apply in either of cases A and B.
(2)Case A is where—
(a)the entertainment is of a kind which it is the company's business to provide, and
(b)the entertainment is provided in the ordinary course of the business either for payment or free of charge in order to advertise to the public generally.
(3)Case B is where the entertainment is provided for employees of the company unless—
(a)the entertainment is also provided for others, and
(b)the provision of the entertainment for the employees is incidental to its provision for the others.
1300Business gifts: exceptionsU.K.
(1)The prohibition in section 1298 on deducting, or bringing into account, expenses incurred in providing gifts does not apply in any of cases A, B, C and D.
(2)Case A is where—
(a)the gift is of an item which it is the company's business to provide, and
(b)the item is given away in the ordinary course of the business in order to advertise to the public generally.
(3)Case B is where the gift incorporates a conspicuous advertisement for the company unless—
(a)the gift is food, drink, tobacco or a token or voucher exchangeable for goods, or
(b)the cost of the gift to the company, together with any other gifts (except food, drink, tobacco or a token or voucher exchangeable for goods) given to the same person in the same accounting period, exceeds £50.
The Treasury may by order amend the sum for the time being specified in paragraph (b) so as to increase it.
(4)Case C is where gifts are provided for employees of the company unless—
(a)gifts are also provided for others, and
(b)the provision of the gifts for the employees is incidental to the provision of gifts for the others.
(5)Case D is where the gift is given to—
(a)a charity,
(b)the Historic Buildings and Monuments Commission for England, or
(c)the Trustees of the National Heritage Memorial Fund.