Income and Corporation Taxes Act 1988

577 Business entertaining expenses. U.K.

(1) M1 Subject to the provisions of this section—

(a) no deduction shall be made in computing profits or gains chargeable to tax under Schedule A or Schedule D for any expenses incurred in providing business entertainment, and such expenses shall not be included in computing any expenses of management in respect of which relief may be given under the Tax Acts;

(b) no deduction for expenses so incurred shall be made from emoluments chargeable to tax under Schedule E; and

(c) for the purposes of [F1 Part II of the 1990 Act], the use of any asset for providing business entertainment shall be treated as use otherwise than for the purposes of trade.

(2) F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The expenses to which paragraph (a) of subsection (1) above applies include, in the case of any person, any sums paid by him to, or on behalf of, or placed by him at the disposal of a member of his staff exclusively for the purpose of defraying expenses incurred or to be incurred by him in providing business entertainment, but where—

(a) any such sum falls to be included in his emoluments chargeable to tax under Schedule E; and

(b) the deduction or inclusion of that sum as mentioned in that paragraph falls to be disallowed in whole or in part by virtue of this section;

paragraph (b) of that subsection shall not preclude the deduction of any expenses defrayed out of that sum.

(4) F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) For the purposes of this section “business entertainment” means entertainment (including hospitality of any kind) provided by a person, or by a member of his staff, in connection with a trade carried on by that person, but does not include anything provided by him for bona fide members of his staff unless its provision for them is incidental to its provision also for others.

(6) F2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) In this section—

(a) any reference to expenses incurred in, or to the use of an asset for, providing entertainment includes a reference to expenses incurred in, or to the use of an asset for, providing anything incidental thereto;

(b) references to a trade include references to any business, profession or vocation; and

(c) references to the members of a person’s staff are references to persons employed by that person, directors of a company or persons engaged in the management of a company being for this purpose deemed to be persons employed by it.

(8) This section shall apply in relation to the provision of a gift as it applies in relation to the provision of entertainment, except that it shall not by virtue of this subsection apply in relation to the provision for any person of a gift consisting of an article incorporating a conspicuous advertisement for the donor, being an article—

(a) which is not food, drink, tobacco or a token or voucher exchangeable for goods; and

(b) the cost of which to the donor, taken together with the cost to him of any other such articles given by him to that person in the same year, does not exceed £10.

(9) M2 Subsection (8) above shall not preclude the deduction, in computing profits or gains under Case I or II of Schedule D, of expenditure incurred in making a gift to a body of persons or trust established for charitable purposes only; and for the purposes of this subsection the Historic Buildings and Monuments Commission for England and the Trustees of the National Heritage Memorial Fund shall each be treated as such a body of persons.

(10) M3 Nothing in this section shall be taken as precluding the deduction of expenses incurred in, or any claim for capital allowances in respect of the use of an asset for, the provision by any person of anything which it is his trade to provide, and which is provided by him in the ordinary course of that trade for payment or, with the object of advertising to the public generally, gratuitously.

Textual Amendments

F1 Words in s. 577(1)(c) substituted (with effect in accordance with s. 164(1)(2) and with application in accordance with s. 164(1)(2) of the amending Act) by Capital Allowances Act 1990 c. 1), Sch. 1 para. 8(30), s. 164(3)

F2 S. 577(2)(4)(6) repealed (with effect in accordance with s. 72(1) of the repealing Act) by Finance Act 1988 (c. 39), Sch 14 Pt. 4

Marginal Citations

M1 Source-1970 s.411(1)-(8); 1985 s.43; 1971 s.50(8)

M2 Source-1980 s.54, 118(3); 1983 s.46(3)(b)

M3 Source-1970 s.411(9)