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

🎁 “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.