Are gifts to clients tax-deductible?

As we are approaching the end of 2022, many business owners will start thinking about gifts for their customers/clients to say thank you for their continued support during the past 12 months.

You might find yourself asking, when are gifts to customers tax-deductible? 

Often, the general rule for business gifts to customers is that they are not tax-deductible expenses, due to them falling under the same bracket as entertaining costs. Entertaining costs do not attract tax relief for your company unless it is for business entertaining. 

There are three examples of where tax relief is available on client gifts…

Advertising giftsHMRC will allow gifts up to a value of £50 to any person in any tax year, however the gift needs to carry an advert for your business, your business name/logo needs to be clearly visible in order for it to be recognised as a corporate gift. The gift cannot consist of food, drink, tobacco, or an exchangeable voucher. Some suggestions are: 

• golf umbrella
• laptop case
• diary
• coffee mug
• bottle opener
• calendar
• water bottle

Not only could these expenses qualify for a tax deduction, but they will also promote your brand to the public. 
It is also worth noting that if the gift costs more than £50, HMRC will disallow the entire amount, not just the amount over the £50, meaning that you will not be able to claim for the gift. 

Stock gifts Secondly, you can provide an item or product that could be used to advertise to the public generally. Any products you would usually give away as free samples could be used as a customer gift. 

Gifts upon Sale In certain circumstances, an item may be classified as part of the sale, rather than a business gift, and so qualify for a tax deduction. Also, there are not any restrictions on the cost of the item, or whether this includes food or drink etc. The critical condition that must be met, is that the ‘gift’ must be part of the sale.

For example, if you offered a gift to customers if they purchase a certain value of goods, then this would qualify as a discount on the sale of the products. This would obviously qualify as a business expense and would be tax deductible for the company.

Whilst the restriction in relation to tax-deductible customer gifts can often limit the options available, it does also present opportunities to promote your brand and save tax at the same time. If you spent £5,000 on tax-deductible gifts, this will save £950 Corporation tax at the current rates.

Do you need any asisstance?

Taxation is a complex area. Get in touch with the team at Oldfield via  info@oldfieldadvisory.com or call 02476673160 and we will be happy to advise on the best tax saving solutions for your business.

Please note: This article is provided for information only and was correct as at time of writing (12/10/22). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.