Entertainment and Gifts

Specifically the position concerned entertainment type expenditure provided as gifts to customers and suppliers.

In the statement the Commissioner states that in her opinion a gift basket, chocolates or wine provided to customers, clients or suppliers would be subject to only a 50% deduction under the entertainment rules.

The Commissioner has formed this opinion on the basis that there is some private and some business benefit provided and the expenditure is of food and drink and so covered by the entertainment rules.

This is different from an earlier statement by the IRD and the position held by a number of taxpayers and tax professionals who only applied the entertainment rules where the food and drink was consumed with the taxpayer and so provided a private benefit to the taxpayer. In the Commissioner’s current view this is incorrect.

The confirmation of the Commissioner’s operational position follows two earlier attempts in 2011 and 2012 which in the Department’s view outlined the correct position but have still resulted in confusion. Specifically the 2012 statement provided that a food and wine gift basket would be fully deductible as long as it is not consumed in certain circumstances.

The Commissioner has not stated this earlier position was wrong however we struggle to see how it can fit with the new position.

The Commissioner plans to enforce her ‘new’ position on entertainment from 1 September 2016 and has indicated no resources will be expended on identifying expenditure before this date.