Commentary on Sections Example 3 Ne = £5,000; Da = 183; De = 183; Smg = 0 Section 358: Business entertainment and gifts: other exceptions
1558.This section contains the other exceptions from the general prohibition on deducting business entertaining and gifts expenses in section 356. It derives from section 577(5), (7)(c) and (8) of ICTA and contains new drafting material.
1559.Subsection (1) provides that the general prohibition on deducting expenses in section 356 does not apply, with some exceptions, if the sums are incurred in providing entertainment or gifts for the employer’s employees. But the prohibition in section 356 does still apply in the circumstances set out in paragraphs (a) and (b) of subsection (1) of section 358.
1560.Subsection (2) treats directors and persons engaged in the management of a company as employed by it for the purpose of this section.
1561.Subsection (3) provides that the general prohibition on deducting entertaining and gifts expenses in section 356 does not apply, with some exceptions, if the sums relate to the provision of a gift which incorporates a conspicuous advertisement for the employer. But the prohibition in section 356 does still apply in the circumstances set out in subsection (3)(a) or (b) of section 358.
1562.The subsection also provides that where the employer is a company, the general prohibition does not apply, with some exceptions, if the expenses are incurred in providing a gift which incorporates a conspicuous advertisement for another company which belongs to the same group as the employer. See Change 96 in Annex 1. This exception will not apply, however, in the circumstances set out in subsection (3)(a) or (b) of this section.
1563.This subsection also removes any doubt there might be about whether an employee is excepted from the prohibition in section 356 where the terms of the exception are met. See Change 96 in Annex 1.
1564.The word “donor” which appears towards the end of the introduction to section 577(8) of ICTA has been changed to “employer” in subsection (3) of section 358. See Change 96 in Annex 1.
1565.The £50 limit in subsection (3)(b) of this section is fixed at that amount by the section. However, section 716(2)(h) of this Act provides that the £50 limit may be increased by an order made by the Treasury. See Change 96 in Annex 1.
1566.Subsection (4) defines “group” for the purposes of subsection (3) of this section.