Are business gifts tax deductible?

Photo of a HMRC form and a calculator

Our baby bouquets make popular corporate gifts for businesses who want to congratulate staff or clients on the arrival of a new baby. However, the legislation around business gifts and tax deduction is complex and can be confusing. In some instances, business gifts can be deducted against profits provided that certain conditions are met. Let’s take a look at the HMRC regulations to help you understand when business gifts are and are not tax-deductible.

What are business gifts?

Business gifts are things that are given by a business to a person without anything being given in exchange. An example of a business gift is a business owner giving a baby bouquet to an employee set to take maternity or paternity leave to congratulate them on their new baby. The employee is under no obligation to provide labour in return for receiving the baby bouquet, so the bouquet stands simply as a gift and not a bonus or payment of any kind.

Are business gifts tax-deductible when given to customers and clients?

According to HMRC Business Income Manual section BIM45065, business gifts should be treated in the same way as business entertainment, which is to say that they are not allowed as tax-deductible expenses when given to non-employees. Unless a business is contractually obliged to provide the gifted item to an individual, it cannot be deducted against profits.

Are business gifts tax-deductible when given to staff?

The HMRC Business Income Manual states in section BIM45074 that when gifts are given by a business to employees, they are classed as ‘staff entertaining expenses’ and are therefore tax-deductible. This is the case so long as the gifts are not also provided to third parties. It’s worth noting that employees themselves may have to pay tax on the gift received, a process that can be managed by the employer in a PAYE Settlement Agreement.

Are businesses gifts tax-deductible when used for advertising?

Section BIM45070 of the HMRC Business Income Manual states that gifts which contain advertisement for the business are tax-deductible. In this instance, the total value of any gifts given to one individual within a single accounting period must not exceed the value of £50, and it must not be food, drink, tobacco, or a voucher that is exchangeable for goods. Furthermore, the advertisement must be on the gift itself and not solely on the wrapping or packaging.

Contact us to discuss corporate maternity and paternity gifts

If you’re interested in gifting baby bouquets to employees set to go on maternity or paternity leave, or to valued clients who have recently had a baby, we’d love to help. Please get in touch with our team to see how we can help with your corporate gifting.