Income Tax (Trading and Other Income) Act 2005 section 46

Business entertainment: exceptions

Section 46 sets out two exceptions to the general rule in section 45 that prohibits deducting the cost of business entertainment from trading profits.

• Entertainment expenses are normally disallowed as a trading deduction under section 45, but two specific exceptions apply.
• Case A allows a deduction where entertainment is the trader's own line of business and is provided in the ordinary course of trade, either for payment or free of charge to advertise to the public generally.
• Case B allows a deduction where entertainment is provided for the trader's own employees, provided the event is genuinely for employees rather than being incidental to entertaining non-employees.
• Case B does not apply if the entertainment is also provided for non-employees and the employee element is merely incidental to the wider event.