Taxation of entertainment expenses

tiemadmin • 31 July 2025

Many business gifts and hospitality costs are not tax-deductible under current rules.

Entertainment expenses including providing hospitality and business gifts are common, but the taxation of these expenses is strictly governed by HMRC.

For businesses carrying on a trade, HMRC legislation generally prohibits tax deductions for client entertainment. If an employee receives a dedicated allowance or is reimbursed specifically for entertaining clients, the expense is generally disallowed when calculating the employer's tax liability.

Meals consumed by the employee during valid entertaining occasions are typically not taxed separately. But if entertainment is deemed personal or social in nature for instance, entertaining personal friends or business acquaintances then the reimbursement becomes taxable income for the employee. Reciprocal business entertaining between business acquaintances that lacks a clear commercial purpose also falls into this category even if some business topics happen to be discussed.

Where an employer provides a round sum allowance not explicitly for entertaining, and the employee uses it for such purposes, tax liability may instead fall on the employee. This includes not only the direct cost of entertaining but also any incidental expenses such as transport or venue hire.

Entertainment includes hospitality and business gifts, except for free samples used to advertise to the general public. Gifts that clearly display an advertisement for the donor may qualify for a limited exemption. However, this exemption does not apply to gifts of food, drink, tobacco, or vouchers, and the total cost per recipient must not exceed £50 per year.

Anyone claiming an exemption for entertaining expenses should keep clear records detailing the amount spent, who was entertained and the business reason behind the expense to support any claim.

< Older Post

Newer Post >

Budgeting and forecasting in a period of lower confidence

by tiemadmin • 9 February 2026
Many business owners are entering the new year with a sense of caution. Confidence across the UK business community has softened, driven by continued cost pressures, uncertainty over tax policy and The post Budgeting and forecasting in a period of lower confidence appeared first on Feldon Accountancy.

Business rates support and cash flow for hospitality businesses

by tiemadmin • 9 February 2026
Hospitality businesses continue to operate in a challenging environment. Rising wage costs, energy prices and supply chain pressures have all placed strain on margins. Against this backdrop, recent The post Business rates support and cash flow for hospitality businesses appeared first on Feldon Accountancy.

Eligibility for Business Asset Disposal Relief

by tiemadmin • 5 February 2026
Business Asset Disposal Relief (BADR) can significantly reduce the Capital Gains Tax due when selling a business or shares, but with higher rates coming from April 2026, timing and eligibility matter The post Eligibility for Business Asset Disposal Relief appeared first on Feldon Accountancy.