Entertainment and Gifting

As we head towards the end of the year, it’s the time when entertainment and gifting comes to mind for many businesses, so what are the rules?

Client entertainment

The general rule is that client entertainment is not allowable – you can’t claim the VAT back and it will be disallowed for tax purposes too. There really is no way around this – sorry! It might be a necessary part of your business but HMRC says no.

Client gift rules

Small gifts to clients / customers / suppliers are tax allowable is they are no more than £50 per year (per recipient) and contain a “prominent” business advert ie branded notepads, branded mugs etc. if these criteria are met then it’s fully allowable.

Gifts to clients that don’t met these criteria are not allowable... and alcohol, cash, tobacco are never allowed.

Staff Christmas parties

If you want to throw a Christmas party for your staff then go ahead... as long as it’s not more than £150 (including VAT) per head then you are all good. But remember – this allowance is per tax year so if you want to do another event for staff in the year, that comes under this same allowance.

Staff gifts

As long as gifts to employees are less than £50 then they are allowable and not reportable as a benefit to HMRC. The £50 is not an allowance and needs to not be cash (or a voucher exchangeable for cash), not be related to their performance or a contractual obligation. As long as these criteria are met then they fall under the Trivial Benefit rules.

It should be noted, that for directors of a “close” company (run by 5 or fewer shareholders) then there is a cap on trivial benefits of £300 in a tax year.

Rachael