What Business Gifts are Tax-Deductible?

Good employers are always looking for ways to keep the working environment - be it in the office or at home - more conducive for their staff and like to show their appreciation every now and then through gifts. They are also looking for ways to connect more effectively with their clients and customers.

With changing working styles, good employers are thinking of innovative ways to care for their employees, keep them motivated and be the ethical workplace that employees want to be a part of and remain with. Anyone interested in a little pick-me-up present now and again? 

As we were doing a bit of research on what the tax-person allows (that is tax-deductible), we thought we'd share some of our findings here.

WHAT BUSINESS GIFTS ARE ALLOWED?

Most business gifts would fall under entertaining costs, with these tax-deductible exceptions of 

Advertising costs in relation to customers and clients.
Employee gifts.
Gifts to charities.

In relation to business gifts for clients and customers that are tax-deductible, the HM Revenue & Customs (HMRC) will allow gifts up to a value of £50 to any person in any tax year. 

CLIENT AND CUSTOMER GIFTS

Client and customer gifts need to carry an advert for your business. 

When considering promotional gifts for clients, such allowable gifts include a calendar, diary, a notepad, USB stick, a golf umbrella, coffee mug, water bottle, bottle opener, a gift set and gift baskets. Yep, you got it - we can help you with the final two on that list!

EMPLOYEE GIFTS AND TRIVIAL BENEFITS

HMRC rules allow company gifts to employees if the total cost, including VAT, does not exceed £50 per employee so many business owners and leaders who would like to buy corporate gifts for their staff at Christmas or another time during the year can do so.

However, there are some further conditions:
- The gift is not cash or a cash voucher (retail store vouchers are acceptable).
- The gift is not provided under any salary sacrifice or other arrangement.
- The gift is not provided in recognition of the employee’s past or future services.

For employees, there are very few restrictions and they can enjoy essentially unlimited trivial benefits each year (that meet the above conditions), but they cannot receive more than one per day. 

Some HMRC trivial benefits include taking employees out for a meal to celebrate a birthday or other event; some drinks on a work night out; a summer party for employees. Additionally, buying employees Christmas or Birthday presents, flowers on the birth of a new baby, bottles of wine for a special occasion, store gift cards, chocolates, wine, and hampers. Once more, we at Peace Lily can assist your business with many of those, especially hampers!

A Note on Trivial Benefits

For companies with five or fewer shareholders, directors can claim tax exempt trivial benefits, with the following conditions:
- The amount you spend will cost you £50 or less each time.
- It is not cash or a voucher that can be exchanged for cash.
- It is not a work-related bonus.
- This is not related to the employee’s work or in their contract.
- The annual limit is trivial benefits £300 per director.

TO CLOSE ...

Gifting to clients, customers and employees does not need to cost the earth, and can make a world of difference.

For employees, a salary isn't enough. Small gifts and gestures can go a long way to make them feel valued. It's a no brainer that a company or business that cares for its employees will have a happier and more connected workforce, that stays with them longer and are more productive. It is a win-win.

Get in touch to find out more on how Peace Lily can help.

Disclaimer: Please contact your accountant or financial adviser for information specific to your circumstances.

SOURCES: 

https://www.gov.uk/expenses-and-benefits-christmas-bonuses/what-to-report-and-pay

https://www.thetaxguys.co.uk/2020/01/09/10-ways-to-reward-your-staff-tax-free/

https://businessinthenews.co.uk/2022/12/21/how-to-give-your-staff-a-tax-free-christmas-bonus/

https://www.contractoradviceuk.net/business-gifts-learn-when-they-are-tax-deductible/

https://www.perkbox.com/uk/platform/perks/4-facts-you-need-to-know-about-trivial-benefits