Can I buy gifts for my clients and staff?
Have you ever wondered what counts as a 'business gift' or whether you can get some tax perks for it? It's a bit of a puzzle, but understanding the basics is key to avoid costly blunders.
Here's a quick guide from to help you wrap your head around business gifts and whether you can claim the VAT back on them and if they are “tax deductible”
What's Considered a 'Business Gift'?
According to HMRC, a business gift is something you give without expecting anything in return.
It's voluntary and not tied to a reciprocal favour.
Most business gifts aren't tax-deductible because they're often seen as "entertaining."
But there are exceptions, especially for small and medium-sized businesses.
So, are Business Gifts Tax Deductible? Let's Find Out!
Gifts to Your Staff
You can get tax relief for giving company gifts to employees if the cost (including VAT) stays below £50 per employee.
You can even claim back VAT on the gift, but it can't be cash or a cash voucher. Plus, it can't be tied to job performance or part of a salary scheme.
If the gift goes over £50, it's considered a "benefit in kind" and gets taxed for both you and your employee.
These gifts are known as 'Trivial Benefits' by HMRC.
Staff Parties
Yes, you can get both corporation tax and VAT relief for annual office parties
The "annual event" allowance lets you spend up to £150 per person on tax-free fun. But there are some details to keep in mind:
It has to be an annual thing, open to all employees.
The £150 per head includes VAT, transportation, and accommodation costs.
If your event costs more than the £150, it might turn into a taxable benefit for your employees.
Parties with clients are just for fun and don't get tax perks so they would be classed as “Client Entertaining”
Presents for Your Customers or Clients
Business gifts eligible are:
Giveaways to the public (like free samples) for promoting your business.
Gifts under £50 that advertise your business, excluding food, drinks, or tobacco. Vouchers are ok, as long as they can't be turned into cash. But if you give someone more than £50 worth of gifts, it's taxable.
Promotional gifts can be things like branded USB sticks, water bottles, diaries, mugs, or calendars.
But bigger, non-promotional gifts for customers or clients aren't tax-deductible.
HMRC says keep solid records of all business gifts in case they want to double-check the value or authenticity later.
Charitable Donations
For limited companies, donating to UK Registered National Charities is generally tax-deductible. But you can't claim Gift Aid or tick the Gift Aid box when donating on your company's behalf.
Summary
So, can business gifts be tax-deductible? Sometimes, yes.
But the rules for tax-free gifts in limited companies can be complex. To stay on the right side of the law, you might want to chat with an accountant.
Keeping good records of your business gifts is always a good idea to avoid any tricky questions from HMRC down the road.