HMRC Rules on Business Gifts: The Complete UK Guide for 2025

Corporation Tax: What's Deductible and What Isn't

For corporation tax purposes, HMRC distinguishes between business entertaining (generally not deductible) and advertising/promotional costs (generally deductible).

Client entertainment — meals, events, hospitality — is specifically disallowed as a corporation tax deduction under ICTA 1988/CTA 2009. If you take a client to dinner or a sporting event, you can't deduct that cost against your corporation tax.

Business gifts are different from entertainment, but HMRC's treatment depends on the nature of the gift. Gifts that carry a clear advertising function — your business name permanently attached, given as part of a marketing programme — are generally treated as advertising costs and are deductible.

Gifts without a direct advertising function are treated as client entertainment and are generally not deductible. A bottle of wine with no branding sent to a client at Christmas is likely to be treated as non-deductible entertainment.

The Advertising Gift Exception: How It Works in Practice

The most favourable treatment for client gifts comes from the advertising gift exception. HMRC allows a deduction for gifts made in the course of trade where the gift bears a 'conspicuous advertisement' for the business.

To qualify, the gift must: (1) carry a conspicuous advertisement for your business — typically your business name, logo, or website; (2) not be food, drink, tobacco, or a voucher exchangeable for goods; and (3) cost no more than £50 per recipient per year.

The food, drink, and voucher exclusion is significant: most traditional corporate hampers and food gifts don't qualify under this exception regardless of whether they're branded. And gift cards (vouchers exchangeable for goods) are explicitly excluded.

This means that choice-based digital gift cards, while highly effective for client retention, don't qualify for the advertising gift exception — they fall into the client entertainment category for deductibility purposes.

VAT on Business Gifts

VAT adds another layer of complexity. When a VAT-registered business gives a gift to a client, HMRC may treat the gift as a 'business gift' for VAT purposes — which can trigger an output VAT charge on the cost of the gift.

The key threshold: if the total value of gifts to a single person in a 12-month period exceeds £50 (excluding VAT), output VAT is due on the full value of the gifts given to that person in that period.

If you stay below £50 per recipient per year, there's no output VAT to account for. If you go above, you must account for output VAT — but you can reclaim input VAT on the cost of purchasing the gift (if the supplier charges VAT).

For digital gift platforms like CustoThanks: the VAT treatment depends on whether the platform charges VAT on its service and whether the gift redemption involves VAT. Confirm the VAT treatment with your accountant and ensure your gift documentation captures the information needed for any VAT reporting.

Gifts to Employees vs. Gifts to Clients

HMRC treats gifts to employees and gifts to clients completely differently. This guide covers client gifts only — but it's worth flagging the distinction because many businesses use the same gifting platform for both.

Employee gifts: generally treated as employment income and subject to PAYE and NIC unless they qualify as 'trivial benefits' (under £50, not cash, not part of a salary arrangement, not a reward for performance). The trivial benefits exemption is useful for small one-off gifts but doesn't work for systematic performance or milestone recognition.

Client gifts: the rules described above apply — deductibility depends on the advertising gift exception or general business expense treatment, and VAT rules apply at the £50 annual threshold.

Using a single gifting platform for both employee and client gifts is operationally sensible — just ensure your accounting distinguishes between the two categories clearly, as the tax treatment diverges significantly.

Documentation: What HMRC Expects

If HMRC queries your gifting spend, you'll need to demonstrate that the gifts were genuine business expenses, not personal entertainment or undeclared benefits.

Good documentation includes: a log of all gifts sent (recipient name, company, date, amount, occasion), evidence of the business relationship (e.g., client account reference), and for advertised gifts, evidence that the gift carried your branding.

Digital gifting platforms that automatically generate recipient logs, send records, and redemption confirmations are ideal for this purpose — the documentation is built into the process rather than maintained separately.