Can I offset the cost of entertaining and gifts against my profits for Income and Corporation Tax purposes?

The rule is that subsistence expenses ARE allowable provided they are incurred wholly and exclusively for the business; Entertaining IS NOT allowable.

And to clarify this further:

Subsistence: Incidental overnight expenses (e.g. laundry, newspapers, phone calls home) are allowable as long as they do not exceed certain limits (£5 per night in the UK and £10 per night outside the UK!).

Excess expenditure on meals whilst working away from the normal workplace ARE generally allowable. For limited companies the expense is generally allowable for Corporation Tax but if ‘not allowable’ it gives rise to a benefit in kind on the employee.

Entertaining: The disallowance applies to gifts to any person unless they (a) carry a prominent advertisement, (b) do not consist of food, drink, tobacco etc., and (c) do not cost in total more than £50.

Xmas parties – reasonable expenditure up to £150 (including VAT and any transport costs) per head is allowable. The expenditure limit may in fact be split between more than one event (and doesn’t have to be at Xmas). Casual hospitality is not counted as a party!