A Christmas gift from the VAT man

The corporation tax rules for clients gifts are well known, but what about the VAT rules?



The corporation tax rules for entertaining clients or giving them gifts say that the gifts have to:

Advertise to the public (i.e. a free sample)
Cost under £50 and include an advert for the company.


A further rule for corporation tax states that if the gift is food, drink, tobacco or vouchers then it isn’t claimable, even if it obeys the previous rule.


With regards to VAT there is also a £50 rule, where gifts totaling more than £50 to one person in a 12 month period result in output tax due.

Gifts below £50 result in input tax that is claimable.


Unlike corporation tax, the VAT rules don’t have caveats for food, drink, etc.


All this means that if you invite a client to share a drink for under £50 then the input tax is not reclaimable.

However, if you gift them the drink, then the input tax is reclaimable.