Can I claim for business gifts as a business expense? The general rule is that these are not tax-deductible as they fall under the same bracket as entertaining costs.
Entertaining costs do not attract tax relief for your company. It is, however, better for your business to pay for these but they must be business entertaining to count as a business expense. If you pay for these yourself, you pay for them out of your income. Your income has already had tax applied to you on a personal basis. Therefore, the same concept applies to gifts as long as they are in line with the guide below.
Although you may be able to claim for business gifts in some instances, two other expenses that are often missed by contractors are Trivial Benefits and the Annual Event (Christmas Party).
Please note there are separate rules for company donations that you should consider if you are thinking about this.
The types of gifts
Business gifts to a client
As a contractor, you may wish to buy a business gift for your client to say thank you for the work that they provided to you.
HMRC will allow gifts up to a value of £50 to any one person or entity in a tax year. The rules state that the gift must be a business gift such as a calendar or diary. It should not be alcohol, food or tobacco, or any voucher that could exchange for these types of things.
The business gift also needs to carry a clear visible advert for your company. If the gift does not show this, HMRC will treat this the same as entertaining costs which are not tax-allowable.
If the cost of the gift comes to more than £50, the whole amount will be tax-deductible.
Business gifts to your company’s employees
The `Annual Event’ is an allowance that allows you to spend up to £150 per employee on an event or series of events.
If you go over the £150 per employee, the whole amount is not tax-deductible.
If employees’ partners attend the event, the expenses will be allowed as long as the total cost is not more than £150 per employee who attend
You can claim for the VAT on Annual Event costs but only on the element that relates to the company employees.
Therefore, apart from the Annual Event mentioned above, other business gifts to staff are not tax-deductible.
Gifts to charities
Gifts to charities are allowed if you make these out of your trading stock.
What’s more, if you would like to donate cash to a charity, this is allowable if it meets certain conditions.
To sum up, business gifts are another one of those areas where it is not always clear what you can claim.
Link to Contractor Advice UK group on