Client gifts
As we head towards the holiday season, I thought it might be a good idea to touch on client gifts. We all like to say thank you to our loyal customers during the holidays but there are certain conditions and limitations to consider regarding if these are tax allowable expenses from a business point of view.
Treat gifts the same as business entertainment
After a long and in-depth search of the HMRC website (and contrary to what I can find on other websites) HMRC states that business gifts are NOT allowable as a deduction against profits. Basically, gifts to clients should be treated as a business entertainment expense. I know I was surprised but I promise it is there in black and white!
There are a few exceptions from the general rule which I have gone into below but first and foremost lets all remember that in this case HMRC are going to require YOU to justify WHY this gift was allowable so keep notes and documentation.
Exceptions
- If the gift is an item which it is the traders to provide and it is given away in the ordinary course of the trade to advertise to the public. So if you sell stationery and you give away a pen with a purchase over a certain amount this would be allowable.
- If the gift incorporates a conspicuous advertisement for the trader. For instance, diaries, pens and mouse mats advertising the business are allowable. (There are exclusions relating to the type of gift and value. For instance, if the gift is of food, drink, tobacco or a token or voucher exchangeable for goods or the cost of the gift exceeds £50 (per recipient in one tax period) it is NOT allowable.)
- The gift is provided to employees so long they are not also given to clients (or incidental of gifts given to clients).
- The gift is given to charity or other specific bodies.
- Occasionally something that appears to be a gift can be considered part of sale. For instance, a bunch of flowers for someone who has purchased a new car can be considered as part of the cost of the car and is therefore allowable.
In summary, say thank you to your clients with small heartfelt business-related gifts which clearly show your branding and make sure you document who received it and when. Maybe HMRC are trying to embrace the TRUE meaning of the holidays and asking all of us small business owners to give not expecting to receive (a tax deduction) or maybe they are all a little BAH HUMBUG! Who knows but please bear it in mind when treating your clients!
