Are all corporate gifts tax free?

Although times are tough, it’s Christmas and you could still get a gift from a client or supplier – will it come with a tax bill attached?

Answer – it all depends on the value:

Certain gifts from third parties are non-taxable subject to satisfying all of the following conditions:

  • The gift must be goods (or voucher capable of being used to obtain goods); and
  • The gift is not from your employer, or a person connected with your employer; and
  • The gift has not been directly or indirectly procured by your employer or by a person connected with your employer; and
  • It has a value of less than £250; and
  • The total cost of all gifts received from the same donor during the tax year is £250 or less

http://www.hmrc.gov.uk/helpsheets/hs207.pdf

An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts can be treated as trivial benefits. For an employer with a large number of employees the total cost of providing a gift to each employee may be considerable, but where the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned.

http://www.hmrc.gov.uk/manuals/eimanual/EIM21863.htm

Will the employer or supplier or client have to account for VAT?

VAT does not have to be accounted for on business gifts made to the same person so long as the total cost of all the gifts does not exceed £50 (excluding VAT) in any 12-month period. It is acceptable for you to adopt any 12-month period that includes the day on which the gift is made.

But, be aware, where the following apply:

  • the total cost of business gifts given to the same person in any 12-month period exceeds £50
  • you were entitled to claim the VAT on the purchase as input tax

you must normally account for output tax on the total cost value of all the gifts. How to work out the cost is explained in Notice 700, ‘The VAT Guide’.

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