Income Tax (Trading and Other Income) Act 2005 section 867

Business entertainment and gifts: non-trades and non-property businesses

Section 867 prohibits the deduction of entertainment and gift expenses when calculating taxable profits from businesses that are not trades, professions, vocations or property businesses, subject to certain exceptions.

• No deduction is allowed for expenses on entertainment or gifts connected with a non-trade, non-property business when calculating taxable profits or other income.
• Sums paid to or made available to employees are also caught by the prohibition, but only where they are provided exclusively for meeting entertainment or gift expenses.
• Exceptions apply under the same rules as for trades — for example, entertaining employees, providing small gifts carrying a business advertisement, and gifts to charities are permitted deductions.
• "Employee" includes company directors and managers, "entertainment" covers all forms of hospitality, and related incidental expenses are also caught by the restriction.