We remind you of the rules on business gifts. What is tax-free these days and what about the VAT?You can have a tax deduction for ‘small’ business gifts against your profits so long as they carry a clear advertisement for your business. ‘Small’ means worth less than £50. But the deduction is denied if the gift is of food, drink, tobacco or gift tokens - the very things we most like to give and receive! So you’ll just have to stick with the calendars, diaries and pens to get your tax deduction. The £50 limit applies to the total value of gifts made to one person in a year.
You won’t be surprised to be reminded that the VAT rules are different. For VAT purposes you can reclaim the VAT on all small gifts you make to customers including tobacco and alcohol. Furthermore, small for VAT purposes means £50 plus VAT. So if you give away bottles of fine malt whisky or vintage champagne costing £40 plus VAT you can recover the £7 of VAT per bottle but there is no tax deduction for the £40. There is a VAT leaflet setting out the rules (700/35). However it is out of date. It still states that VAT cannot be recovered on any gifts worth more than £15, but this limit was increased to £50 plus VAT from 8 March 2001.