You may wish to consider the tax liabilities associated with gifts. Many companies view gifts as an ideal means of promoting their business and boosting morale amongst their workforce. However – as ever – the tax legislation is not as straightforward and it is important to take appropriate advice to ensure adverse tax implications are not incurred along the way.
Corporate Gifts to Clients
Generally, gifts to clients are caught within the Customer Entertainment rules and are not allowable for tax purposes.
As ever, there are exceptions to these rules and if the gift falls within the following exceptions it will be deductible for the calculation of trading profits:
- Free samples given to clients. The samples must be part of the trade’s business to provide; or
- Gifts which contain a conspicuous advertisement for the trader. This rule excludes gifts of food, drink, tobacco or gift vouchers. The total cost of gifts to the recipient within a tax period must not exceed £50. Common examples may be diaries, calendars, mouse mats, etc; or
- Gift to a charitable body.
Gifts to Employees
Gifts to employees will generally be tax deductible for the business but care must be taken to ensure the gift is not taxable on the employee!
Generally, any additional benefits provided to employees will be deemed to be additional employment income. In this instance, the employee may be subject to additional income tax and both employee and employer may be liable for National Insurance Contributions (NICs).
Gift vouchers, presents and additional work perks such as gym memberships are all at risk of being viewed as additional remuneration unless they meet the “trivial exemption” definition.
Gifts are viewed as trivial if the cost of providing the gift does not exceed £50. Furthermore, the gift must not be:
- Cash or a cash voucher;
- A reward for their work or performance; and
- In the terms of their contract
As long as a gift to an employee meets these conditions it will be tax-free.
We recommend your business utilises this key tax benefit when considering gifts to employees – it is not often the tax system enhances the sprinkling of Christmas cheer!
Please note, that these are the general rules however the UK tax system is wrought with a multitude of ifs and buts and accurate tax advice will depend on your particular set of circumstances.
If you would like advice on your situation please get in touch with our Tax Advisory team: taxteam@robson-laidler.co.uk or visit our tax services.