Business gifts
18/11/2021

The rules for deciding whether a gift given in the course of business is deductible are complex. The rules for business gifts generally follow those for business entertaining expenditure. This means that HMRC take the view that in general business gifts are not an allowable deduction from profit for tax purposes.

However, there are exceptions to this rule. Where the following exceptions apply, the expenses incurred in providing the gift are deductible from trading profits. The exceptions are where:

  • the gift is of an item which it is the trader’s trade to provide and it is given away in the ordinary course of the trade to advertise to the public
  • the gift incorporates a conspicuous advertisement for the trader, although there are exclusions relating to the type of gift and the total amount per person
  • the gift is provided to the employees of the trader so long as this is not incidental to gifts being provided to others
  • the gift is given to charity or other specific bodies.

HMRC is clear that in some instances, something that appears to be a gift may actually be a part of a sale to a customer. HMRC’s manuals provide the example of a bunch of flowers presented to a customer who has just purchased a new car would effectively have been paid for by the customer - it is a part of the cost of the car. Similarly, gifts offered to customers who purchase a certain level of goods are really discounts on sale and not business gifts. Gifts of this nature are not disallowed by the legislation.


Newsletter Signup

With our newsletter, you automatically receive our latest news by e-mail and get access to the archive including advanced search options!

» Sign up for the newsletter

Newsfeed Search


Accreditation

ICAEW White

xeroplat

Brighton

19 New Road
Brighton
East Sussex
BN1 1UF

Tel: 01273 321526
Fax: 01273 321565
[email protected]

Rustington

2-4 Ash Lane
Rustington
Sussex
BN16 3BZ

Tel: 01903 772244
Fax: 01903 771071
[email protected]