An entertainment allowance is a fixed amount paid to an employee toward the cost of entertaining clients or business contacts. Unlike a travel or subsistence allowance, it carries no built-in tax-free portion.
What it means
The law removed the deduction that once applied to entertainment allowances, so an entertainment allowance is now taxed in full as part of remuneration. There is no deemed amount to set against it, which makes it effectively the same as ordinary taxable pay for PAYE purposes.
Where it fits in
An entertainment allowance is a fully taxable earnings component included in gross remuneration each period. It behaves like a general taxable allowance for PAYE and is reported under the relevant IRP5 source code.
Key rules
- A fixed amount toward business entertainment costs.
- Fully taxable, with no tax-free portion.
- Treated like a general taxable allowance for PAYE.
- Reported under the prescribed IRP5 source code.
