Remember that before you consider the application of Section 336
ITEPA 2003 to entertainment expenses incurred by an employee or
office holder you must first satisfy yourself that Section 356 does
not prohibit a deduction (see
EIM32565).
In cases where Section 356 does not prevent a deduction under
Section 336, bear in mind that entertaining customers, clients and
other business contacts is part and parcel of everyday commercial
life. This is particularly so where orders for goods are concerned.
If an employee is required for genuine business reasons to
entertain customers, suppliers or other business connections in the
course of his or her duties, the expense of doing so can be
regarded as satisfying the statutory test in Section 336. This is
the case whether the purpose of the occasion was to discuss a
particular business project or to maintain existing or new business
contacts, even though no specific business was done.
Where the entertainment expenses incurred on a particular
occasion are admissible norestriction should be made for the cost of the employee's
own food and drinks.
Sometimes expenditure does not relate to a genuine working
occasion. It may simply cover entertainment of the employee's
colleagues or friends where there was no business obligation to do
so. In that situation no deduction should be given. See also
EIM32620.
If entertainment expenses do not satisfy the conditions in
Section 336 the disallowance extends to expenditure incidental to
the entertainment such as taxi fares to and from a restaurant.
An employee who requests a deduction for entertainment expenses should be able to support that request with reasonable records of the amounts spent on particular occasions, the nature of the entertainment, the persons entertained and the reasons for the entertainment.
