As a general rule, business gifts are not allowed as a deduction against profits if it is something given to a person without receiving anything in exchange.
There is no tax deduction unless it can be shown that the business was under some contractual obligation to offer the gift.
There are some exceptions to this rule which a business should look to take advantage of.
- The gift is a good of the business’s trade and it is given away in the ordinary course of the trade to advertise to the public (i.e. free samples). Tax relief can be claimed on the cost of giving away the free samples
- The gift incorporates a conspicuous advertisement for the business and
- It is not food, drink, tobacco, a token or a voucher for these goods, and
- The cost of the gift does not exceed £50
- The gift is given to a charity
- Where it is an unincorporated business, the charity should have some local connection to the business, however, there should be no personal connection with the charity. There should also be some publicity surrounding the donation
- Companies can claim Charitable Donations relief where it is a qualifying charitable donation to a charity which is registered in the UK, European Economic Area (EEA), Iceland, or Norway.
- The gift is provided to your employees
- While the cost of the gift will be allowable as a deduction against profits, the provision of gifts to employees is reportable as a benefit in kind on a form P11D (or PAYE Settlement Agreement) with Income Tax and National Insurance (NI) charges arising
- However, an exception to this rule applies where the benefit is ‘trivial’