Contractors' Questions: How to give clients a gift without it taxing me?

Contractor’s Question:How best for consultants to give their clients a gift as part of their package of services and/or products, and what’s the most efficient way to do this from a tax and accounting standpoint?

A non-IT freelancer who I know gives clients of his business a gift and I think I could do something similar with customers of my ‘Plan B’ operation – maybe a pen or plaque with our new logo for example?

From an accountancy or tax perspective, how much would be a sensible or efficient threshold as regards the price of the item/gift? Would there be unwanted tax implications?

Expert’s Answer: The rules from HMRC on gifts are clear. Business gifts are generally disallowed for tax purposes unless:

  • The total costs of all assets gifted to the same person in the same accounting period is not more than £50; and
  • The gift bears the business name, logo or a clear advertisement; and
  • The gift does not include food, drink or tobacco.

Gifts of items which are in the taxpayer’s trade to provide (for example, trade samples) are also allowed.

Therefore, as long as the expenditure meets the above criteria, then pens or plaques would attract tax relief in your company. HMRC specify diaries, pens and mouse mats in their literature and that the advertisement should be on the gift itself and not the wrapping.

You should be able to claim the VAT on these items, as long as they are in the course of your business.

Lastly, no VAT is payable on the value of a gift to customers as long as the total cost of all the business gifts to a particular recipient, in an accounting period, does not exceed £50 including VAT.

The expert was Matt Fryer, compliance manager at contractor accountancy firm Brookson.

Wednesday 23rd September 2015