B2.432 Entertainment and gifts
HMRC's internal guidance concerning business entertainment is contained in BIM45000 onwards.
Expenditure on business entertainment and gifts is expressly disallowed by statute1. Entertainment includes hospitality of any kind2, although this term is not defined in the legislation. Further guidance is provided in HMRC's Manuals3.
The expenses incurred in providing entertainment or a gift include expenses incurred in providing anything incidental to the provision of entertainment or a gift4. The term 'incidental' is not defined for this purpose, but HMRC states5 that it means any expenditure that is incurred directly or indirectly in connection with the provision of entertainment. This might include payments to a third party for the organisation of entertainment or the costs of issuing invitations to customers and it includes travel6. It will also include the cost of maintaining assets, such as yachts, which are used for business entertainment purposes.
However, the disallowance does not apply where:
• it is the company's business to provide entertainment, such as an events manager, and it is provided in the ordinary course of its business, for payment or free of charge, in order to advertise to the public7, or
• it is provided for the company's employees, unless that provision is incidental to the provision for others8
Employees of a company include a director and a person engaged in the management of
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