It is the season of giving so why not treat your customers with tax free presents?
Gifts to customers can generally be classed under entertaining or advertising and marketing. It can take in many forms such as free samples of your product, free pen or mug that carries advertising for your company or your own branded wine or plum pudding.
Tax On Customer Gifts
Customer gifts with entertaining as the main purpose are not tax-deductible and VAT is only recoverable in limited cases. However, free samples of your products are generally accepted as advertising and promotion and the costs are tax deductible and VAT is recoverable.
The gift must carry a conspicuous advertisement of your company in order to avoid being classified as entertainment expenses.
This is the chance to promote your brand and reward your loyal customers !
Customer Gifts Costing Less Than £50
- VAT is recoverable subject to aggregate limits over a rolling 12 month period.
- Tax deductible as advertising if it carries your advert. It must not be not food, drink, tobacco or exchangeable vouchers.
Customer Gifts Costing More Than £50
- VAT is either irrecoverable, or if recovered, an output VAT charge must be accounted for.
- It is unlikely to be accepted as tax deductible.