🎁 1. Gifts to Clients, Customers, Suppliers

As we approach Christmas time there are particular rules around gifts and the tax rules assiocated with them

General rule:
These are classed as “business entertainment” by HMRC, so costs are non-deductible and no VAT reclaim, unless they meet strict exceptions. [gov.uk],

Exceptions (for deductibility and VAT reclaim):

• The gift must cost £50 or less per recipient per tax year (including VAT).
• It must carry conspicuous business branding (logo/name).
• Such Item can include Pens, Journals, Water Bottle, T-shirts
• It must not be food, drink, tobacco, or a voucher redeemable for goods/services.

If criteria are not met:

• Full cost is disallowed, even if £51.
• VAT cannot be reclaimed; if VAT was reclaimed initially, output VAT must be accounted for. [gov.uk]

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🧑‍💼 2. Gifts to Employees

Trivial Benefits rules (tax & NI exempt):

• Cost ≤ £50 per employee (including VAT).
• Non-cash items (not cash or vouchers).
• Not provided as part of performance or contract.
• Not part of a routine (e.g., weekly gifts).
• Paid directly by the business (not reimbursed).

Additional limits:

• Directors of “close companies” face a £300 total trivial benefit annual cap. [accaglobal.com],

If value or criteria exceeded:

• Treated as a taxable benefit in kind.
• Subject to tax, National Insurance, and must be reported via P11D or PAYE Settlement Agreement. [accaglobal.com],

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🎉 3. Staff Parties & Events

• Annual events (e.g., Christmas party) are exempt from tax/NI if cost ≤ £150 per person and open to all employees.
• Combined cost across multiple events must remain under this threshold.
• If exceeded, full cost per attendee becomes taxable and subject to Class 1A NIC and reportable on P11D.

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💷 4. VAT on Business Gifts

According to HMRC’s VAT guidance (Notice 700/7):

• Input VAT claimable if gift cost (excluding VAT) ≤ £50 per recipient over 12 months.
• If cost exceeds £50, must account for output VAT at the standard rate. [gov.uk],
• To avoid issues, businesses may choose not to claim input VAT initially.
• With proper records, input VAT claims can be adjusted retrospectively (up to 4 years back).

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📝 5. Record-Keeping & Compliance

• Keep clear records: who received what gift, date, cost, and business purpose.
• Track cumulative annual gift values for each recipient to stay within £50 or £150 thresholds.
• For employee benefits, track total trivial benefits especially for directors (limit £300).
• Record VAT reclaimed or paid to HMRC as output VAT on gifts exceeding threshold.

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✅ Quick Reference Table

Recipient	Value Limit	Conditions	Tax Deductible?	VAT Reclaimable?	Employee Impact
Clients/Suppliers	≤ £50 per year	Must be branded; not food/drink/voucher	✅	✅	N/A
Exceeding £50	—	—	❌	❌ / VAT due	N/A
Employees – Trivial Benefit	≤ £50 per gift (£300 cap)	Non-cash, non-contractual, ad hoc	Exempt benefit	—	No tax/NI reporting
Staff Party/Event	≤ £150 per person	All staff invited	Exempt benefit	Apportioned	No tax/NI, no P11D if within limit
Exceeding limits	—	—	❌