Entertaining and gifts expenditure should always be analysed to ascertain the extent to which expenditure is allowable or disallowable. The tax computation should include clear descriptions and breakdowns of expenditure. This document discusses the tax treatment of business entertainment, incidental costs of entertainment, and gifts to employees and third party.

Points discussed within this guidance note:

> Entertainment

Expenditure on 'business entertainment' is specifically disallowed as a deduction from trading profits, unless the expenditure is made in the ordinary course of a business' trade of providing entertainment.

> Definition of ‘business entertainment’

This note considers HMRC rules on entertainment, business entertainment tax and how to ascertain what is allowable business entertainment.

> Employees

> Specialist providers

> Gifts

Tax on gifts to employees - Business gifts are generally disal-lowable under the same provisions as apply to business entertainment however expenditure on gifts should be allowable provided that it meets one of four criteria listed in this note.

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