Are gifts to customers tax deductible?

I run a small advertising agency as a limited company and I want to send our clients and suppliers a small Christmas gift which will have our logo on. I am not sure exactly what the gift will be yet but they are likely to be roughly £25 to £50 each. Will these costs be allowable and are there any limits or other issues to be aware of?


gifts to clients


Answer, December 2017:


If you follow a few simple rules, you’ll be able to get tax relief on your businesses Christmas gifts to clients & suppliers:


Rule 1 : The gift must not be food, drink, tobacco or a token or voucher exchangeable for goods.


Rule 2:   The gift itself must carry an advertisement for your business. A business logo would be perfect for this – but make sure the logo is actually on the item itself, not just on the packaging.


Rule 3:   The cost of the gift must not exceed £50 – and the total cost of gifts to the same recipient must not exceed £50 in your accounting period.


As long as these three rules are followed, you can treat the cost as an allowable expense for tax purposes.

If you are VAT registered then any VAT on these gifts would also be recoverable, again subject to the rules being followed.

Any gifts made to clients / suppliers that do not meet these rules would be treated as business entertaining and would not be allowable for tax.

These rules apply to sole traders and other unincorporated businesses, as well as to limited companies.

When it comes to gifts to a companies own directors you might want to check out another blog post we have about trivial benefits.