When an employer provides hospitality to customers, guests
and/or employees at a sporting or cultural venue, the employees are
potentially subject to a benefit charge under Section 203(2) and
Section 204 ITEPA 2003 (
EIM21101) for themselves and any members
of their family or household (
EIM20504) who attend. The customers
attending the event will be exempt from a tax charge if the
conditions of Section 265 ITEPA are met, or if they are not
employees.
The total cost to the employer will consist of the cost of
hire for the box or equivalent facility (this may be a daily,
seasonal or annual rate), plus additional costs of entertaining,
such as food and drink. This total cost should be apportioned (
EIM21200) between all those who attend,
in order to arrive at a unit cost.
If a company hires a hospitality box at a football ground for a
match day at a cost of £2,500, and incurs further costs of
£500 on food and drink, the total cost is £3,000. If the
event is attended by 10 customers and five employees, the unit cost
is £200. The customers are exempt under Section 265. For the
five employees this figure of £200 will be the amount of the
potential benefit chargeable on each of them. Whether the employees
are actually chargeable on this benefit depends if they are
entitled to a deduction from the benefit, under Section 336 ITEPA
2003 (
EIM32615), via Section 357 ITEPA 2003.
If three of the employees are sales staff required to attend
as part of their employment duties, the provision of entertainment
is likely to be incidental to the hospitality provided to the
customers. If so it is classed as “business
entertainment” under Section 577(5) ICTA 1988 (see
BIM45000) and the cost should
be added back in the employer’s tax computation and we would
normally accept that the conditions for relief under Section 336
are met. Consequently there is no chargeable benefit for the sales
staff. If the other two employees attend purely as a perk, they
will not be entitled to relief under Section 336. They will be
chargeable on a benefit based on the unit cost of £200.
It is common for an employer to hire a box for a season or a
year, in which case the seasonal/annual cost of hire must be
apportioned on the basis of the number of days of use, to arrive at
a unit cost per day of use. Once a daily cost has been calculated,
the same process as set out above should be followed to determine
the amount of the benefit, if any, for those employees who use the
facility. As well as use on match days, a box at a football ground
may be used occasionally by the employer for business meetings away
from the work premises. If so, these days should be included in the
total number of days on which the box is used, to determine the
average daily cost relative to the annual/seasonal hire charge.
Employees are unlikely to be subject to a benefit charge for days
spent solely attending a business meeting.
For information on entertainment expenses see
EIM32565.
