Income Tax (Earnings and Pensions) Act 2003 section 265

Third party entertainment

Section 265 provides an exemption from income tax where entertainment or hospitality is provided to an employee by a third party, provided certain conditions are met.

• Entertainment provided to an employee (or their family/household member) by a genuine third party is exempt from income tax, provided three conditions are all satisfied.
• The entertainment must not be provided by the employer or anyone connected with the employer, and the employer must not have directly or indirectly arranged it.
• The entertainment must be genuinely gratuitous — it cannot be a reward for past services or an incentive for future services performed in the course of the employment.
• "Entertainment" is broadly defined to include hospitality of any kind, and corresponding exemptions exist where the entertainment is provided via non-cash vouchers or credit tokens (sections 266 and 267).