VAT and business gifts

18 November 2021

In general, VAT does not have to be accounted for on business gifts to the same person as long as the total cost of the gifts does not exceed £50 (before VAT) in any 12-month period. The definition of business gifts includes items from brochures, posters and advertising matters, gifts to trade customers, long service awards and retirement awards and goods given to customers as a ‘thank you’.

Where the total cost of business gifts given to the same person in any 12-month period exceeds £50, and the business was entitled to claim VAT on the purchase, then output tax must be accounted for on the total value of the gifts. It is acceptable to adopt any 12-month period that includes the day on which the gift is made.

There is no requirement for businesses to account for VAT if the gift is a free sample given for marketing purposes and that meets the following definition used by HMRC:

‘A specimen of a product which is intended to promote the sales of that product, and which allows the characteristics and qualities of that product to be assessed without resulting in final consumption, other than where final consumption is inherent in such promotional transactions.’

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