Ernst & Young recently carried out a survey among middle managers and found that many consider any spending of more than £100 per person "lavish". It is, therefore, not surprising that 58% of those surveyed said that they would like more clearly defined financial limits on hospitality expenditure.
At the minute, some businesses can rely on industry codes to set out corporate hospitality costs - such as the Eucomed Guidelines on Interactions with Healthcare Professionals - but in the main, the majority of companies set their own internal limits, and some still leave hospitality expenditure decisions up to individuals within the organisation.
At present there are no published financial guidelines, either from the Ministry of Justice, Serious Fraud Office or the Scottish Serious and Organised Crime Division as to what constitutes lavish expenditure that would give rise to the inference that the hospitality offered is a bribe.
The lack of set financial limits means that businesses are often operating in a grey area - with some opting for a zero tolerance approach and very strict financial limits, while others are choosing to continue their previous levels of hospitality spending without any review of the process. It is therefore seemingly inevitable that the survey found that 68% of middle managers said the Bribery Act's more restrictive rules on hospitality expenditure "had either made no difference or they were unaware of any significant reduction to their hospitality spend".
We may have to wait for the decision of the courts to rule on what hospitality is 'proportionate' under the Bribery Act, before we have a clearer understanding of what monetary limits should be set on corporate entertainment. In the meantime businesses should look at:
- the intended business purpose of the entertainment;
- the relationship between the parties and the circumstances surrounding the entertainment; and
- the reasonableness of the entertainment as seen by the ordinary UK person in order to make a proportionate assessment of the value versus benefit of the hospitality.
At the time the Bribery Act 2010 Guidance was produced, the Government was at pains to highlight that the key message in relation to expenditure around entertainment and hospitality was that of proportionality. Kenneth Clarke, the then Home Secretary said in his introduction to the Guidance, "rest assured no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix". He was obviously not of the opinion that a £100 spend per person on hospitality is "lavish".
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
