Christmas Gifts from Businesses
With Christmas fast approaching, as a business owner you may be wondering how to reward your employees while still complying with all the tax rules.
The basic rule is that you cannot claim tax relief on business gifts, as they come under the default category of entertainment. However, there are a number of exceptions to this, explained below.
Advertising – You are allowed to claim tax relief if you give away items like free samples which advertise your business. Gifts which cost less than £50 can be defined by HMRC as ‘trivial’ and are also eligible, provided they carry a conspicuous advertisement for your company, and it is not part of a series of presents to the same person which total more than £50 in one accounting period. Gifts of drink, tobacco, food or an exchangeable voucher, are ineligible for tax relief.
VAT – Where a company gives out gifts which cost more than £50, or a series of presents to the same person which come to more than that sum, then it needs to account for output VAT on the value of the gifts. This is not necessary if the gift is a free sample of the company’s products.
Employee Gifts – Any gift made by a company to its staff is considered tax deductible, unless gifts are also provided for others as well and the gifts provided to the employees are incidental to those. You can claim VAT on the cost of these gifts.
Charities – You can claim tax relief on business gifts to charities. Presents to specific organisations such as The Historic Buildings and Monuments Commission for England, and the National Heritage Memorial Fund, also qualify. There is no need to provide receipts if the gift comes from the proceeds of trading stock.
If the present is in the form of cash, then this is not normally classed as a business gift, so unless special rules apply it will not be considered tax deductible. However you may still be able to claim tax relief on the donation as long as you register with HMRC for Gift Aid. This means you will receive a refund in the form of a deduction from your overall profits.
Subscriptions – If you pay a subscription, for example to a trade association, then these are not generally classified as gifts. They are eligible for tax relief under the business purpose test.
If you need any more advice on exemptions for company Christmas gifts, contact Orwell Accountants. As experienced business accountants covering the Felixstowe and Ipswich areas, we can tell you what items are eligible and will help you deal with all the admin. Follow the link above to get in touch.