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    Christmas……a time for giving.

    Everyone likes to be able to give gifts, especially around Christmas time but what are the tax implications of doing this through your business?

    Gifting, like entertainment is generally a ‘no no’ although there are some occasions where you can provide a small thank you to clients and employees and here are the do’s and don’ts to ensure there are no tax implications for your business:

    Your clients:

    Where the gift given incorporates an advertisement for the business, e.g. features the business name or logo then that may be tax deductible.

    For example, a branded drinks bottle, umbrella or diary for the following year would all be allowable.

    BUT if the gift consists of food, drink, tobacco, or any voucher that can be exchanged for goods, then that is not tax deductible, even if they feature business branding.

    There is also a further restriction in that the cost of the gift cannot exceed £50 per recipient.

    However allowances can be made where a company gifts of one of their products i.e. a free sample, and the item is given away during the ordinary course of that business, to advertise to the public generally. An example, if the business is a micro-brewery, then it could make Christmas gifts of its products to the general public for promotional purposes and obtain a tax deduction for the cost of doing so.

    Christmas donations to charities in lieu of gifts would also be tax deductible so are worth considering.

    Your employees:

    As well as the allowances for staff entertainment which permit a provision for the staff Christmas party you can provide small gifts for employees under HMRC’s ‘Trivial Benefits’ rules

    You don’t have to pay tax on a benefit for your employee if all the following apply:

    • it cost you £50 or less to provide
    • it isn’t cash or a cash voucher (vouchers in exchange for goods or services is fine)
    • it isn’t a reward for their work or performance
    • it isn’t in the terms of their contract

    These gifts are known as a ‘trivial benefits’. You don’t need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know.

    BUT you will have to pay tax on any benefits that don’t meet all these criteria and also there is a limit for close companies, which includes the typical family-owned company of £300  limit per tax year for gifts to a director and their family.

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