Staff entertainment

The Inland Revenue is tightening up on the tax treatment of staff entertainment.

The cost of staff entertainment is not automatically disallowable for the employer unless (a) the provision of entertainment for staff members is incidental to its provision for others or (b), exceptionally, the expenditure is not wholly and exclusively for the purposes of employer’s trade.

However, some employers have been taking an informal short-cut: although the expenses of staff entertainment would strictly be tax-deductible, they have disallowed the costs in the employers’ tax computation rather than reporting the benefit of the entertainment on the employee’s form P11D.

The Inland Revenue has now announced that this informal practice is not acceptable under Self Assessment for individuals and companies.