Festive Gifts & Parties - What's allowed for tax purposes?
Can I buy my staff a gift through the company?
Yes! You need to meet all of the following criteria:
- it cost you £50 or less to provide
- it isn’t cash or a cash voucher
- it isn’t a reward for their work or performance
- it isn’t in the terms of their contract
A box of chocolates and a bottle of wine is perfectly acceptable, this are all tax-deductible too. If the company employs you, the company can buy you a gift too!
If you go over the £50 allowance, this becomes reportable to HMRC on a P11d form, which most employees won’t thank you for – so best to stay under the threshold.
Can I buy my clients / customers a present?
Yes you can, however, you can’t claim the tax back.
Gifts come under the same rules as entertaining, so if you want to be able to claim the VAT and corporation tax element back fully, they need to meet the three rules below:
- Under £50 per person/entity
- Have a clear business advertisement
- Not be food, alcohol, cash, vouchers that are exchanged in retail outlets or tobacco (unless this is a product the business makes/sells)
Your usual Christmas gifts are unlikely to meet these rules, HOWEVER, it still makes more sense to buy them out of a business rather than your own personal pocket. If you buy them personally, you’ve paid tax and NI on that income to purchase them. If you buy them out the business, it doesn’t get treated as income just as disallowable for tax expense.
Can I throw a Christmas party?
Yes! And again HMRC set out some criteria you need to meet, the party or meal out must:
- be open to all your employees
- be annual, such as a Christmas party or summer barbecue
- cost £150 or less per person
If they meet the above criteria, they are fully deductible for tax purposes.
Be careful with multiple events though, the total combined cost per head must be less than £150 per head.