Part 5 U.K.Employment income: deductions allowed from earnings

Chapter 2 U.K.Deductions for employee’s expenses

Modifications etc. (not altering text)

C1 Pt. 5 Ch. 2 restricted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 33 para. 1(5) (with Sch. 36)

Disallowance of business entertainment and gifts expenses U.K.

357 Business entertainment and gifts: exception where employer’s expenses disallowed U.K.

(1) The prohibition in section 356 on deducting expenses does not apply if—

(a) the earnings include an amount in respect of the expenses,

(b) the employer—

(i) paid the amount to, or on behalf of, the employee, or

(ii) put it at the employee’s disposal,

exclusively for meeting expenses incurred or to be incurred by the employee in providing the entertainment or gift, and

(c) condition A, B or C is met.

(2) Condition A is that the deduction of the amount falls to be disallowed under [F1 section 45 or 867 of ITTOIA 2005 or under] [F2 section 1298 of CTA 2009] in calculating the employer’s profits from the trade, profession or vocation in question for the purposes of the Tax Acts (or it would do so apart from the exemption in section 505(1)(e) of ICTA [F3 or section 524 of ITA 2007] or any relief applying in respect of those profits).

[F4 (3) Condition B is that the inclusion of the amount falls to be disallowed (or would be disallowed apart from some other relief applying to the employer) under [F5 section 1298 of CTA 2009] in calculating—

(a) the employer’s expenses of management for the purposes of giving relief under the Tax Acts, or

(b) the employer’s expenses deduction under section 76 of ICTA (companies carrying on life assurance business).]

(4) Condition C is that—

(a) the employer is a tonnage tax company during the whole or part of the tax year, and

(b) apart from the tonnage tax election, the deduction of the amount included in the employee’s earnings would fall to be disallowed in calculating the employer’s relevant shipping profits.

(5) In subsection (4) “tonnage tax company”, “tonnage tax election” and “relevant shipping profits” have the same meaning as in Schedule 22 to FA 2000.

Textual Amendments

F1 Words in s. 357(2) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 593 (with Sch. 2)

F2 Words in s. 357(2) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 552(2) (with Sch. 2 Pts. 1, 2)

F3 Words in s. 357(2) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 436 (with Sch. 2)

F4 S. 357(3) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 68(2)

F5 Words in s. 357(3) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 552(3) (with Sch. 2 Pts. 1, 2)