Contractors’ Questions: Can my limited company buy champagne as a Christmas gift for my mentor?

Contractor’s Question: Can I give someone in the marketplace who’s supported both myself and my limited company in sort of a mentoring role over the last challenging year a Christmas gift, by using what I’ve heard is a trivial benefits allowance from HMRC?

But how much is ‘trivial’ in HMRC’s eyes, £50, £100,? And would champagne or other alcohol be permissible as the gift my company purchases, again using whatever the trivial benefit allowance is? I tried to treat the person to an Xmas meal but dates clash. Please help!

Expert’s Answer: I like the question and understand the thinking from both a personal and business point of view, but I’m sorry to say I’m the bearer of bad news this festive season!

How about a promotional biro instead?

Unless you want to supply a mouse mat, a promotional biro or some such item, you are going to be buying the bottle of bubbly for them personally; and not seeing a penny of tax relief in any shape or form.

The short answer on HMRC’s ‘trivial benefits’ is that there is no such allowance for buying gifts for people outside the business.

There is guidance on trivial benefits for employees and HMRC’s guidance is quite succinct when it comes to what they define as ‘trivial benefits’ paid to employees of the company.

Four conditions for staff trivial benefits

You don’t have to pay tax on a gift (a benefit) for your employees if all of the following conditions are met:

  • It cost you £50 or less to provide
  • It isn’t cash or a cash voucher
  • It isn’t a reward for their work or performance
  • It isn’t in the terms of their contract.

When these criteria are met, the benefit is known as a trivial benefit. There’s no need to inform HMRC, and the trivial benefit won’t count towards taxable income or Class 1 National Insurance contributions.

The purpose of the allowance was to simplify taxable benefit reporting, which changed in April 2016, to allow employers to thank staff or recognise milestones without the need to report these to HMRC on a P11D.

Gifting as a company to non-staff

Let’s now turn to the rules from HMRC on gifts to people who are NOT employees.

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 permitted by HMRC.

Therefore, as long as the expenditure meets the above criteria, the gift would qualify for corporation tax relief.

Unfortunately for you and your supporter, HMRC has this area wrapped up quite nicely

If your supporter likes a tipple it probably won’t help, but HMRC specifies diaries, pens and mouse mats as acceptable items, yet the Revenue also states that the logo/advertisement should be on the gift itself and not the wrapping!

The expert was Christian Hickmott, chief executive of contractor accountancy firm Integro Accounting.

Thursday 2nd Dec 2021
Profile picture for user Christian Hickmott

Written by Christian Hickmott

Founder and CEO of Integro Accounting, Christian Hickmott has over 20 years of accountancy and working practice knowledge. He understands the wants and needs of contractors, having lead some of the largest accountancy firms in the business before founding Integro Accounting in 2013. A multi-award-winning brand based on integrity, trust and loyalty.

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