Gifts and Tax

gift_staff_clients_2020

Gifts and Tax

Around this time of year, I start to get questions as to what gifts can be bought for clients and staff.  Fortunately, the rules are fairly straight forward.

Gifts to Staff

Gifts to staff are taxable for the employee as they are assumed to be rewards.  However, the Christmas meal or Summer BBQ would come under Staff Entertaining and for this you are allowed £150 per member of staff per year.  If you are only a two-person company then that is a £300 annual budget.    HMRC has no issue with the £150 being spent in one go or across the year. 

Go over the £150 by even £1 and the whole expense is now not allowable. 

Gifts to Customers

In order for a gift to a customer to be an allowable tax deduction it must meet several rules.

  • The gift must not cost more than £50
  • It must not be food, alcohol, or tobacco
  • It must not be cash or be able to be exchanged for cash (cash voucher)
  • It must carry some form of advertisement promoting your business

Again, go over the £50 limit by £1 and the entire cost will not be allowable. 

Summary

Even a two director firm can have an annual or bi-annual meal out on the company and providing you stamp your logo, or something similar, on client gifts there’s nothing to prevent you from saying “thank you for your business”, at any time of year.   

Have a great Holiday Season and Best Wishes for 2021!

 
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