It’s nearly Easter time, and many businesses like to utilise occasions like this to share the love with clients and colleagues. But what are the tax implications of giving gifts through your business?

Gifting is generally a ‘no no’, although there are some occasions where you can provide a small ‘thank you’ gift…

 

Gifting to your clients or customers

Where the gift given incorporates an advertisement for the business, e.g. the business name or logo features, then the gift 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 (namely chocolate easter eggs), 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 when a company gifts one of their products such as with a free sample, and if the item is given away during the ordinary course of that business to advertise to the public generally. For example, if the business is a micro-brewery, then it could make a seasonal gift of its products to the general public for promotional purposes and obtain a tax deduction for the cost of doing so.

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

 

Gifting to employees

As well as the allowances for staff entertainment which permit a provision for a staff party (or 2) throughout the year, 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 ‘trivial benefits’. You don’t need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know. This means gifting food or drink would be allowable under these rules, so you could provide a delicious treat for your team at Easter.

 

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 a £300 limit per tax year for gifts to a director and their family.

 

In conclusion, instead of an Easter egg, consider sending your clients or customers Easter-egg-shaped Post It notes and save the chocolate as a treat for your employees.