Sweet Gesture or Sour Tax? The Rules on Gifts for Clients and Prospects

Creative businesses often love to surprise clients (and impress prospects) with thoughtful treats – a box of artisan chocolates, a tray of brownies, or branded cupcakes. It’s a great way to show appreciation, stand out, and add a personal touch to your relationships.

But what about the tax side? Can you claim these costs? And do you need to worry about VAT? Here’s what UK creative businesses should know before they press “checkout” on that luxury gift hamper.

Business Gifts Are Not Always Tax-Deductible

Generally, HMRC is pretty strict about gifts. Most gifts you give to clients are not tax-deductible because they’re seen as business entertainment, not a necessary business expense.

The exception:

• If the gift is a promotional item that carries a clear and conspicuous advert for your business (for example, your logo on a water bottle), and

• It costs less than £50 per recipient per year, and

• It’s not food, drink, or tobacco (and not vouchers that can be exchanged for goods or cash).

Sadly, that last condition rules out chocolate, wine, or cake. So while they’re lovely gifts, don’t expect a corporation tax deduction for them.

Gifts to Staff Are Treated Differently

If those same chocolates are for your own employees, the rules are kinder. Small, infrequent gifts (such as birthday treats or seasonal hampers) often fall under the trivial benefits exemption – meaning there’s no tax or National Insurance due, as long as each gift costs no more than £50 and isn’t given as a direct reward for work done.

VAT on Client Gifts

If you’re VAT registered, you can normally reclaim the VAT on goods you buy for business use. But when those goods are given away:

• If the total cost of gifts to the same person in a 12-month period is £50 or less (excluding VAT), you can still reclaim VAT.

• If you exceed that £50 threshold, you’ll have to account for output VAT as if you’d sold the items.

This means a single small box of chocolates is unlikely to cause issues, but regular gifting to the same client could.

Why You Might Still Give Gifts Anyway

Even though the tax rules aren’t sweet on edible gifts, there’s still a strong business case for them:

• They build goodwill and help you stand out in a crowded creative market.

• They create memorable experiences that can lead to repeat work.

• They’re a simple way to show appreciation for loyal clients or thank prospects for their time.

Just don’t expect HMRC to share your enthusiasm – factor the cost into your marketing budget rather than relying on a tax deduction.

Quick Takeaway

• Chocolates, cakes, wine, and other food/drink gifts for clients or prospects are not tax-deductible.

• Branded promotional items under £50 are deductible, but only if they’re not food, drink or tobacco.

• VAT can be reclaimed on small gifts (up to £50 per recipient per year), but not above that limit.

• Staff gifts are fine if they meet the trivial benefit rules.

So go ahead – spread joy with your creative flair. Just remember that while those cupcakes may sweeten relationships, they won’t sweeten your tax bill.