Picking out the perfect corporate Christmas gift is tricky, isn’t it?
You want to show appreciation and strengthen ties with clients and employees, but there's always that question in the back of your mind: "What about the taxes?"
If you've ever felt stuck between wanting to give generously and fearing the tax implications, you're not alone.
What are Corporate Gifts?
Corporate gifts are items a company gives to clients, employees, or partners. These gifts serve as a means of appreciation and relationship building in a professional setting. They reflect a company's recognition of the recipient's value and contribute to strengthening business relationships.
The choice of a corporate gift often represents the company's image and ethos, making the selection process an important aspect of corporate strategy.
Examples of Corporate Gifts
Examples of corporate gifts include:
Office supplies for everyday use. (i.e. notepads, pens, calendars, etc.)
Customised items for a personal touch. (i.e. coffee mugs, hats, etc.)
Luxury gifts for special occasions. (i.e. tech gadgets, gourmet foods, etc.)
Are Corporate Gifts Tax Deductible?
When it comes to tax deductibility, corporate gifts occupy a unique space. Generally, they are not deductible, but there are notable exceptions:
Corporate gifts are tax deductible if their cost does not exceed £50 per person per year. Staying below this threshold is essential as it ensures the gifts are categorised as a business expense, and eligible for tax relief.
For tax deductibility, these gifts should be used as a promotional items bearing the company's branding, as per HMRC. The branding should be on the gift, not just the packaging. This condition helps in classifying the gift as an advertising tool, rather than a personal gift, making it tax deductible.
Non-deductible items include tobacco, food, drink, or exchangeable vouchers.
It’s also important to note the type of gifts given. Gifts considered as entertainment, such as tickets to events, are not tax deductible. This exclusion is critical for compliance with tax regulations.
Tax Deductions for Gifts as Part of Sales & Promotions
Enhancing your marketing while taking advantage of tax deductions can be effectively done by incorporating gifts into sales and promotions:
Gifts with purchases: Adding a gift as an incentive for product purchases, such as a free tote bag with every clothing purchase over a certain amount, can be tax deductible. These gifts are treated as promotional expenses, not as standard gifts, making them more likely to qualify for deductions.
Gifting during business operations: Distributing your products as gifts in promotional activities, like giving a sample product at a trade show, can also be tax deductible.
Make sure to keep records of these transactions to ensure compliance and maximise tax benefits.
Can You Claim VAT on Corporate Gifts?
When it comes to claiming VAT on corporate gifts, there are specific criteria and processes that businesses must follow to ensure compliance with HMRC regulations.
Gifts under £50: For corporate gifts that are less than £50 in value, there's no need to worry about VAT implications. These gifts fall under the threshold and are simpler to manage from a VAT perspective.
Gifts over £50: If a corporate gift exceeds the £50 mark, it's possible to reclaim VAT. However, these must be reported as sales in your VAT accounts, as per HMRC's classification of these as 'business supplies'.
Make sure to keep detailed records of all gifts over £50, including recipient details and the reason for the gift. This will be essential for compliance and beneficial in the event of an HMRC audit.
Are Employee Gifts Tax Deductible?
So, we’ve covered gifting corporate gifts to clients or customers, but what about employee gifts?
When it comes to employee gifts, understanding HMRC's Trivial Benefits scheme is key. Under this scheme, you're not required to pay tax on an employee benefit if it meets all these conditions:
Gifts cost £50 or less per employee.
The gifts are not cash or cash vouchers. Non-cash items like gift cards are acceptable, as long as they don't allow cash withdrawals.
These gifts should not be linked to services rendered or part of a contract.
Gifts for directors of 'close' companies cost no more than £300.
Gifts that meet all the requirements are considered ‘trivial benefits’. This means that there's no need to pay tax or National Insurance on these, nor do you have to report them to HMRC.
If you’re wondering about company holiday parties, check out our article on whether Christmas parties are tax deductible.
Guide to Choosing Corporate Gifts: Ideas & Best Practices
Picking out corporate gifts is more than just ticking a box. It's about thoughtfulness, reflecting your company's character, and staying within the rules.
Here are some factors to consider:
It’s all about getting personal. Think about who you’re gifting – what do they like? What’s their lifestyle? A well-chosen gift that resonates with the recipient's interests can really make their day.
Your gifts should speak your company’s language. They're not just gifts; they're a slice of your company culture. Make sure they align with what your business stands for.
Navigating the tax rules is crucial. Keep an eye on those limits for tax deductible gifts and choose items that fit within legal guidelines.
Corporate Gift Ideas That Hit the Mark
Personalised office supplies: Customised items like notepads, pens, or desk accessories can be both practical and thoughtful. Make sure they align with your brand for a personal touch.
Tech gadgets: High-quality tech accessories that complement the recipient's professional life, like wireless chargers or Bluetooth headphones, can be excellent choices. Just remember to keep within the tax-deductible limits.
Wellness products: Gifts that promote wellness, such as fitness trackers or ergonomic office tools, show that you care about the recipient's health and well-being.
Eco-friendly items: Consider sustainable and eco-friendly gifts to align with environmentally conscious values. Reusable water bottles, eco-friendly notebooks, or plant-based items can be great options.
Experience-based gifts: Offering experiences, like online courses or virtual event tickets, can be enriching and memorable. They're also typically compliant with most gift-giving policies.
With these ideas and a bit of thoughtfulness, you can pick out corporate gifts that are meaningful, compliant, and sure to be a hit.
Conclusion: Making Corporate Gifting Count
As the festive season approaches, the art of corporate gifting takes on a special significance. More than just a token of thanks, these gifts are a reflection of your business relationships and the care you invest in them. Choosing the right holiday gift can speak volumes about your company's values and the appreciation you hold for those connections.
With Christmas around the corner, it's not just about finding a gift that resonates; it's also about understanding the tax implications to make sure your kind gestures are as smart financially as they are heartfelt.
As you navigate this festive season, remember that the perfect gift can truly set your company apart. It's about balancing generosity with financial responsibility, making sure your holiday gifts leave a lasting impression both personally and professionally.
If you're looking to streamline your expense management, why not see what ExpenseIn can do for you? Book a demo with ExpenseIn today and discover how easy managing company expenses and corporate gifting can be.
For more top tips, check out our ExpenseIn blog, including related blogs such as 'Are Christmas Party Expenses Tax Deductable?'.
