Gifts to Clients
Overview 📘
HMRC allows businesses to give small gifts to clients, provided certain conditions are met. These gifts can be a thoughtful way to maintain client relationships while remaining compliant with tax and VAT rules.
However, the rules are quite strict: to qualify for tax relief, the gift must meet all the criteria set out by HMRC. If it doesn’t, it will instead be treated as client entertainment, which is not tax-deductible.
🔗 HMRC Guide: Business gifts and samples
✅ Conditions for Tax-Deductible Gifts
Businesses can provide gifts to clients worth up to £50 per tax year, as long as all of the following apply:
- The gift is business-related.
- It cannot include alcohol, food, or tobacco, or vouchers that can be exchanged for these items.
- It must prominently display your company’s branding or logo (e.g., notebooks, reusable bottles, or calendars).
- The total cost, including gift wrapping and presentation, must not exceed £50.
💡 If the total cost exceeds £50, the whole amount is disallowed – not just the excess.
📊 Example
| Gift Type | Meets Criteria? | Deductible? | Notes |
|---|---|---|---|
| Branded coffee mug worth £12 | ✅ | Yes | Under £50 and branded. |
| Branded bottle of wine worth £35 | ❌ | No | Alcohol excluded. |
| Box of chocolates without branding worth £25 | ❌ | No | Not branded – treated as client entertainment. |
| Branded notebook set worth £55 (including wrapping) | ❌ | No | Exceeds £50 limit, so entire cost disallowed. |
🎁 “Small” Gifts from Third Parties
Employees may also receive gifts from third parties due to their work-related activities.
As long as these gifts:
- Do not exceed £250 in value, and
- Are given in connection with their work (not as part of a contractual agreement),
then they are not taxable for the employee.
💡 Example: A client sends an employee a £200 hamper as a thank-you - this would be exempt under the £250 rule.
🔗 HMRC: Employment Income Manual – third party gifts
🔍 VAT on Entertainment
VAT rules differ depending on whether the expense is for clients or staff:
- Client entertainment: VAT is not recoverable.
- Staff entertainment: VAT can be reclaimed if it's for employees.
However:
- “Staff” does not include partners, contractors, or former employees.
- If such individuals are invited to a staff event, their portion of the cost must be apportioned and excluded from VAT recovery.
- When entertainment is provided only for directors, partners, or sole traders, it is not considered business-related, and VAT cannot be reclaimed.
- If they attend a mixed event with staff, VAT may be reclaimed proportionally.
🔗 HMRC: VAT Notice 700/65 – Business entertainment
💡 Practical Tip
Keep detailed records of:
- The type of gift or event,
- Recipients, and
- Associated costs (including wrapping or branding).
These details help support your tax and VAT treatment if HMRC reviews your entertainment costs.