What to consider with gifts

Which gifts are allowable expenses, and which are disallowable?

Allowable for Corporation Tax:

• Gifts to members of staff
• A gift to a customer that costs less than £50 as long as it is a conspicuous advertisement for the business. The gift cannot be food, drink, or tobacco. In addition, the gift cannot be a voucher that could be exchanged for goods.
• One trade sample per year to each customer. If the trade sample is given with the intention that it will be resold it will not qualify.

Disallowable for Corporation Tax:

• A gift that does meet the above criteria

If I give a gift to staff, Can the company and employee incur a tax liability?

Depends on the gift as explained below

Cash Gifts – This is treated as earnings and will therefore be run through the company payroll. The employee and company will incur National Insurance and Income Tax liabilities as a result.

A gift that costs less than £50 will not incur a tax liability related to a taxable benefit. However, if the gift is a work-related incentive (i.e. the gift is only given in return for work being additional working hours) it does not qualify for the exemption. Any vouchers that could be exchanged for cash will also not qualify for the exemption regardless of its value.

A gift over £50, vouchers and gifts offered as a work-related incentive must be reported to HMRC via a P11 D or PSA and therefore a tax liability is incurred.

Long service awards – If you would like to know the tax implications of providing a long serving member of staff with a gift then get in touch with your client manager.

If my gift is taxable what happens next?

The gift will have to reported on a P11 D or a PSA. If the gift is reported on a P11 D then both the employee and employer will incur additional tax liabilities per the below.

• The employer will incur Class 1A National Insurance which is currently set at 13.8% for the 20/21 tax year.
• HMRC will collect income tax from the employee through a reduction in their personal allowance

If you would like to prevent the employee from paying tax on the gift they receive from you, the company could report the gift via a PSA and pay the employees tax on their behalf.