Although ordinary travel in itself is not business
entertainment, travelling costs incurred in connection with
business entertaining are not an allowable expense. This is because
they are ‘incidental’ to the provision of
entertainment.
For example, if a company pays for its customers to travel to
a sporting event then the cost of the travel is not allowable. On
the other hand, the company may claim a deduction for transporting
customers to an event that does not include any element of
entertainment.
Often the event to which travel is provided will include a
mixture of business and entertaining and so you must establish the
primary purpose of the event. If the main purpose is work related
(for example a press conference at which drinks and light
refreshments are provided) then the travel is not incidental to
business entertainment and is allowed as a trading expense.
However, if the main purpose is to provide entertainment then the
travel is incidental expenditure and is not allowable. An example
of this is a social weekend during which a presentation on the
company’s products takes place.
There may be occasions where the travel provided is not
normal travel from one place to another but is actually a part of
the hospitality provided. An example might be a trip on the Orient
Express. Here the travel is hospitality in itself, whatever the
purpose of the event at the end of the journey.
Employees’ travelling costs may present particular
problems. The entertainment of employees is not business
entertainment unless it is incidental to entertainment provided for
others (see
BIM45033 - BIM45034). For example, where
an employee travels in a taxi with a customer prior to lunch at a
restaurant then the whole of the taxi fare is incidental to
business entertainment and is not allowable. However (provided the
expenditure is for business purposes) the cost of the employee
travelling alone to meet the customer at the restaurant is
allowable. Here the travel is incidental to the employee’s
requirement to be at the restaurant and not to the entertainment
itself.
